<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JANUARY 5, 1996
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
(Exact name of registrant as specified in charter)
STATE OF WASHINGTON 0-18307 91-1423516
(State or other jurisdiction of (Commission (IRS Employer
of incorporation) File Number) Identification No.)
NORTHLAND COMMUNICATIONS CORPORATION
3600 WASHINGTON MUTUAL TOWER
1201 THIRD AVENUE, SEATTLE, WASHINGTON 98101
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (206) 621-7244
N.A.
(Former name or former address, if changed since last report)
This filing contains_____pages. Exhibits Index appears on page_______.
<PAGE> 2
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
ITEM 2. ACQUISITION OF ASSETS
On November 17, 1995, Northland Cable Properties Eight Limited
Partnership (the "Registrant") entered into an agreement to acquire
substantially all operating assets and franchise rights of the cable television
systems in or around the incorporated community of Swainsboro and nearby
unincorporated areas of Emanuel County, all in the state of Georgia (the
"Swainsboro system"). The cable television systems represent approximately 3,100
basic subscribers and were owned by TCI Cablevision of Georgia, Inc. (the
"Seller"). The assets were acquired on January 5, 1996 for a total purchase
price of $6,056,326 of which $5,751,326 was paid at the closing date and the
balance of $305,000 was deposited into an escrow account. Final payment from the
escrow account, net of any purchase price adjustments, is due no later than May
4, 1996. The purchase price is based on the Seller's representations as to
monthly revenues and the number of basic subscribers as of the closing date.
There is no material relationship between the Registrant and the Seller or any
of their affiliates, directors, officers or associates.
The cable television system assets acquired were used by the Seller to
provide cable television service to the subscribers of the communities described
below. The Registrant intends to continue such use.
FINANCING
The purchase was financed by borrowings under the Registrant's term loan
facility. At the time of this filing, the balance outstanding under the credit
facility is $11,675,000. The interest rates on the credit facility were as
follows: $10,600,000 fixed at 8.86% under the terms of an interest rate swap
agreement with the Registrant's lender expiring January 11, 1998; $1,075,000
fixed at 9.00% under the terms of a six month LIBOR agreement expiring June 30,
1996.
PROFILE OF THE SWAINSBORO SYSTEM
The Swainsboro system serves the incorporated community of Swainsboro and
nearby unincorporated areas of Emanuel County, Georgia. Swainsboro is
approximately 90 miles northwest of Savannah, Georgia and is the county seat for
Emanuel County. Manufacturing is a major industry in this area. Swainsboro is
home to East Georgia College, a unit of the University System of Georgia and
Swainsboro Technical Institute.
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EFFECTS OF REGULATION
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Act"). The 1992 Act
substantially reregulated the cable television industry and imposed numerous
requirements, including provisions subjecting rates for certain services and
equipment to regulation by the applicable local franchising authority and by the
Federal Communications Commission ("FCC"), exclusive programming arrangements,
the carriage of broadcast signals, customer service standards, leased access
channels, customer premises equipment compatibility and various other matters.
On April 1, 1993, the FCC announced the adoption of rate regulations which
became effective September 1, 1993. Under those initial regulations, rates were
evaluated against "competitive benchmarks" and were generally subject to
rollbacks if they exceeded the benchmark levels. On February 22, 1994, the FCC
substantially revised the rate regulation rules to effect further rate
reductions effective May 15, 1994, or later in certain circumstances, based on
complex formulas and revised benchmarks.
All of the Registrant's cable systems are potentially subject to rate
regulation. The 1992 Act (i) requires the FCC to establish rate standards for
basic cable service rates which may be regulated by the applicable local
franchising authority, (ii) requires the FCC, upon receipt of a complaint, to
review rates for additional tiers of cable service, (iii) regulates rates for
mandatorily offered commercial leased access channels and (iv) eliminates the
automatic five percent annual increase for basic rates allowed under prior law.
Rates for channels offered on a per-channel basis as individual purchase options
and pay-per-view events are excluded from rate regulation.
Basic service rates, including the equipment used to receive basic
service, may be regulated by a local franchising authority once it has been
"certified" by the FCC. When the certification becomes effective, the local
franchise authority may request the cable operator to justify its existing rates
charged for basic service and related equipment ("request for justification" or
"RFJ"). Rates charged in excess of the maximum allowable rates determined under
FCC regulations are subject to refund for the period in which the excess rates
were charged or one year, whichever is shorter. Additional tiers of service are
subject to regulation only upon an appropriately filed complaint to the FCC by
any subscriber, franchising authority or other person ("subscriber complaints").
If no subscriber complaints are filed within 45 days of a change in the FCC
regulated rates, such rates are not subject to challenge unless and until the
cable operator seeks to modify them. Refund liability, if any, generally would
be limited to any incremental increase in rates. In late 1994, the FCC revised
its rules to permit cable operators to offer New Product Tiers at rates which
they elect so long as, among other conditions, other channels that are subject
to rate regulation are priced in conformity with applicable regulations and
cable operators do not remove programming services from existing service tiers
and offer them on the New Product Tier.
On May 5, 1995, the FCC announced the adoption of a simplified set of
alternative rate regulation rules that will apply to "small" cable systems,
defined as a system serving 15,000 or fewer subscribers, that are owned by
"small" companies, defined as a company serving 400,000 or fewer subscribers.
Under the FCC's definition, the Registrant is a "small" company and each of the
Registrant's cable systems are "small" systems. Maximum permitted rates under
these revised rules is dependent on several factors including the number of
regulated channels offered, net asset basis of plant and equipment used to
deliver regulated services, the number of subscribers served and a reasonable
rate of return.
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As of the date of this filing, no local franchising authorities have
elected to certify, no RFJ's have bee received from franchise authorities and no
subscriber complaints have been filed Based on management's analysis, the rates
charged by these systems are within the maximum rates allowed under FCC rate
regulations.
Future rate increases under this regulatory environment will be
dependent on several factors including the level of inflation as measured by the
annual change in the GNP-PI index, increases in "external costs" as defined by
the FCC and possible changes to the existing rules regarding rate increases
associated with the launch of new services on regulated tiers. Because of the
uncertainties associated with these factors the future impact of rate regulation
on the Registrant's results of operations cannot be determined at this time.
Management feels it is reasonably possible under the price cap mechanism that
operating margins will stabilize and perhaps increase in future periods as
inflation and external cost increases are allowed to be passed through to
subscribers through rate adjustment.
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<TABLE>
<CAPTION>
SUBSCRIBER SUMMARY
- ------------------
(As of January 5, 1996)
<S> <C>
Estimated Homes Passed: 3,700
Basic Subscribers:
Basic 3,031
Bulk Equivalent 27
-----
Total 3,058
=====
% of Homes Passed 83%
==
Pay Subscribers:
Total 2,813
=====
% of Basic 92%
==
CURRENT RATES
- -------------
(excluding franchise fees, including sales tax)
Basic 22.39
HBO 13.90
Cinemax 13.70
Disney 12.20
Showtime 13.90
Installation 25.07
Reconnect fee 25.07
Transfer fee 25.07
Install extra outlet 25.07
</TABLE>
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CHANNEL LINE-UP - SWAINSBORO, GEORGIA
<TABLE>
<CAPTION>
CABLE OFF-AIR NETWORK
CHANNEL CHANNEL STATION LOCATION
------- ------- ------- --------
<S> <C> <C> <C>
2 WRDW
3 3 WSAV NBC (Savannah, GA)
4 WXFG
5 Home Box Office
6 6 WJBF ABC (Augusta, SC)
7 11 WTOC CBS (Savannah, GA)
8 22 WJCL ABC (Savannah, GA)
9 9 WVAN IND (Savannah, GA)
10 The Preview Guide
11 C-SPAN
12 The Weather Channel
13 Black Entertainment Channel
14 Encore
15 The Faith & Values Channel
16 Quality Value Channel
17 The Disney Channel
18 Lifetime
19 Family Channel
20 Cinemax
21 F/X
22 Showtime
23 Sports South
24 ESPN
25 USA Network
26 Turner Network Television
27 American Movie Classics
28 WGN
29 The Nashville Network
30 WTBS
31 The Discovery Channel
32 CNBC
33 A&E
34 CNN
35 CNN Headline News
36 Nickelodeon
37 MTV
49 Starz!
50 Pay Per View
</TABLE>
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FRANCHISE AGREEMENTS
The Systems operate under the terms of following franchise agreements:
<TABLE>
<CAPTION>
FRANCHISE EXPIRATION DATE FRANCHISE FEE
<S> <C> <C>
City of Swainsboro 04/05/2012 3%
County of Emanuel 07/06/2012 3%
</TABLE>
7
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Sequentially
Numbered
Page
------------
Item 7. Financial Statements and Exhibits
Financial Statements, Pro Forma
(a)(4) The financial statements required to be filed
were not available as of the date of this filing.
(b)(2)(c) Exhibits
--------
10.31 Asset Purchase Agreement between Northland
Cable Properties Eight Limited Partnership and
TCI Cablevision of Georgia, Inc.,
dated November 17, 1995
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
BY: Northland Communications Corporation,
Managing General Partner
Dated:_________ BY: /s/ GARY S. JONES
-------------
Gary S. Jones
(Vice President)
9
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INDEX TO EXHIBITS
Exhibit Sequentially
Number Description Numbered Page
- --------------------------------------------------------------------------------
10.31 Asset Purchase Agreement between
Northland Cable Properties Eight
Limited Partnership and TCI
Cablevision of Georgia, Inc.,
dated November 17, 1995 _________
10
<PAGE> 1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
("BUYER")
AND
TCI CABLEVISION OF GEORGIA, INC.
("SELLER")
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions......................................................................1
1.1 Agreement....................................................................1
1.2 Assets.......................................................................1
1.2.1 Cash and Cash Equivalents.............................................1
1.2.2 CATV Instruments......................................................1
1.2.3 CATV Equipment........................................................2
1.2.4 Real Property.........................................................2
1.2.5 Seller Contracts......................................................2
1.2.6 Intangibles...........................................................2
1.3 Basic Package Services.......................................................2
1.4 Basic Service Tier...........................................................2
1.5 Basic Subscriber.............................................................2
1.6 Business Day.................................................................2
1.7 CATV.........................................................................2
1.8 CATV Systems.................................................................3
1.9 CLI Rules....................................................................3
1.10 Closing and Closing Date.....................................................3
1.11 Code.........................................................................3
1.12 Equivalent Billing Units.....................................................3
1.13 Equivalent Subscribers.......................................................3
1.14 ERISA........................................................................3
1.15 Excluded Assets..............................................................3
1.16 FCC..........................................................................3
1.17 Minimum Monthly Revenue......................................................4
1.18 Monthly Revenue..............................................................4
1.19 Pay-TV Services..............................................................4
1.20 Permitted Exceptions.........................................................4
1.21 Proforma Monthly Revenue.....................................................4
1.22 Purchase Price...............................................................4
1.23 Rate Reduction Order.........................................................4
1.24 Remedial Steps...............................................................4
1.25 Required Consents............................................................4
1.26 Revenue Determination Period.................................................5
1.27 Security Interest............................................................5
1.28 Seller's Knowledge...........................................................5
1.29 Technical Standards..........................................................5
Section 2. Sale of Assets...............................................................5
2.1 Agreement to Purchase and Sell...............................................5
2.2 Assets to Be Sold............................................................5
Section 3. Purchase Price...............................................................5
3.1 Purchase Price...............................................................5
3.1.1 Cash..................................................................5
3.1.2 Escrow................................................................5
3.2 Adjustments and Prorations to the Purchase Price at Closing .................6
</TABLE>
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<TABLE>
<S> <C>
3.2.1 Shortfall Adjustments.................................................6
3.2.2 Prorations and Other Adjustments......................................6
3.2.3 Adjustments for Cost of Escrow........................................7
3.2.4 Adjustments for Accounts Receivable...................................7
3.3 Post-Closing Adjustments.....................................................8
3.3.1 Procedure .............................................................8
3.3.2 Property Taxes ........................................................8
3.4 Allocation of Purchase Price.................................................8
Section 4. Assumption of Liabilities........................................................8
4.1 Assignment and Assumption....................................................8
4.2 Limitation of Liability......................................................9
4.3 Sales and Transfer Taxes; Third-Party Consents. .............................9
Section 5. Representations and Warranties of Seller.........................................9
5.1 Organization and Authority...................................................9
5.2 Schedules...................................................................10
5.3 No Breach or Violation......................................................10
5.4 Title to Assets.............................................................10
5.5 Real Property...............................................................10
5.5.1 Zoning...............................................................10
5.5.2 Access; Utilities....................................................10
5.5.3 Effectiveness of Leases..............................................11
5.5.4 Easements............................................................11
5.5.5 Environmental Matters................................................11
5.6 Required Consents...........................................................11
5.7 CATV Instruments and Seller Contracts.......................................12
5.7.1 Effectiveness........................................................12
5.7.2 Copies...............................................................12
5.8 FCC Compliance..............................................................12
5.8.1 General Compliance...................................................12
5.8.2 CLI Compliance.......................................................14
5.8.3 Tests and Compliance with Standards..................................14
5.8.4 System Repair........................................................14
5.8.5 Carriage of Broadcast Signals........................................15
5.9 Copyrights, Patents and Trademarks..........................................15
5.9.1 Copyright Filings....................................................15
5.9.2 Copyright Infringement...............................................15
5.9.3 Payment of Copyright Royalties and Fines.............................15
5.9.4 Patents, Trademarks..................................................15
5.10 Assets and CATV Business....................................................15
5.10.1 Generally............................................................15
5.10.2 Cable Plant Design and Performance...................................16
5.11 Litigation and Proceedings..................................................16
5.12 Tax Returns; Other Reports..................................................16
5.13 Employment Matters..........................................................16
5.13.1 Employees...........................................................16
5.13.2 Employment Relationship.............................................16
5.13.3 Unions..............................................................16
5.13.4 Benefits............................................................17
</TABLE>
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<TABLE>
<S> <C>
5.13.5 Plans...............................................................17
5.13.6 Seller's Responsibility.............................................17
5.13.7 Health Care Continuation............................................17
5.13.8 Miscellaneous Federal Acts..........................................17
5.13.9 FCC Filings.........................................................17
5.14 Subscribers Fees and Rates..................................................17
5.15 Insolvency Proceedings......................................................17
5.16 Finders and Brokers.........................................................18
5.17 Citizenship.................................................................18
5.18 Overbuilds; Competition.....................................................18
5.19 Financial Statements........................................................18
5.20 Free CATV Service...........................................................18
5.21 Pole Attachments............................................................18
5.22 Full Disclosure.............................................................19
Section 6. Buyer's Representations and Warranties..........................................19
6.1 Organization and Authority..................................................19
6.2 Litigation and Proceedings..................................................19
6.3 Finders and Brokers.........................................................19
6.4 Citizenship.................................................................19
6.5 No Breach or Violation......................................................19
6.6 No Consents.................................................................20
Section 7. Conduct Pending Closing.........................................................20
7.1 Access to Premises and Records..............................................20
7.2 Continuity and Maintenance of Operations....................................20
7.3 Existing Relationships......................................................21
7.4 Employees; Employment Relationship..........................................21
7.5 Buyer's Right to Employ.....................................................21
7.6 Approvals...................................................................21
7.7 News Releases and Media Notification........................................22
7.8 Written, Executed Easements.................................................22
7.9 Buyer's Inspection; Adequacy of Seller's Remedial Steps ....................22
7.10 Retransmission Consent Agreements...........................................22
Section 8. Closing; Closing Date; Termination..............................................22
8.1 Closing Date................................................................22
8.2 Termination.................................................................23
8.3 Effect of Termination.......................................................23
Section 9. Seller's Obligations At and Prior to Closing....................................23
9.1 Transaction Documents.......................................................24
9.2 Closing Documents Checklist.................................................24
9.3 Security Interest Searches..................................................24
9.4 Employees...................................................................24
</TABLE>
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<TABLE>
<S> <C>
Section 10. Buyer's Obligations Prior to, At and Following Closing ........................24
10.1 Prior to Closing............................................................24
10.2 At Closing..................................................................24
10.3 After Closing...............................................................24
Section 11. Conditions of Buyer's Obligations..............................................25
11.1 Approvals and Consents......................................................25
11.1.1 Franchises..........................................................25
11.1.2 Other Required Consents ............................................25
11.1.3 Retransmission Consent Agreements ..................................25
11.2 Performance by Seller of Covenants and Accuracy of Representations
and Warranties............................................................25
11.2.1 Performance of Covenants............................................25
11.2.2 Operability.........................................................25
11.2.3 Restraint of Proceedings............................................25
11.2.4 No Governmental Action..............................................25
11.2.5 Equivalent Subscribers and Monthly Revenue..........................26
11.2.6 Updated Schedules...................................................26
11.2.7 Representation Letters..............................................26
11.2.8 Technical Standards.................................................26
11.3 Conveyance of Title to Assets...............................................26
11.3.1 Security Interests..................................................26
11.3.2 Title Insurance.....................................................26
Section 12. Conditions of Seller's Obligations.............................................27
12.1 Performance by Buyer........................................................27
12.2 Buyer's Certificate. ......................................................27
12.3 Operability.................................................................27
12.4 Restraint of Proceedings....................................................27
12.5 No Governmental Action......................................................27
12.6 Closing Documents...........................................................27
Section 13. Noncompetition Agreement ......................................................27
Section 14. Indemnification................................................................27
14.1 Survival of Representations, Warranties and Covenants.......................27
14.2 Limitations of Liability....................................................28
14.3 Indemnification ............................................................29
14.4 Defense of Claims ..........................................................30
14.5 Dispute Resolution Regarding Indemnification Claims ........................31
Section 15. Miscellaneous.................................................................31
15.1 Governing Law...............................................................31
15.2 Assignment and Delegation of Agreement......................................31
15.3 Entire Agreement; Amendments................................................31
15.4 Binding Effect..............................................................32
15.5 Additional Agreements.......................................................32
15.6 Efforts.....................................................................32
15.7 Expenses....................................................................32
15.8 Execution in Multiple Counterparts..........................................32
</TABLE>
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<TABLE>
<S> <C>
15.9 Schedules and Exhibits......................................................32
15.10 Waiver......................................................................33
15.11 Counsel ....................................................................33
15.12 Captions and Headings.......................................................33
15.13 Notices.....................................................................33
15.14 Legal Expenses..............................................................34
15.15 Severability; Invalidity....................................................34
15.16 Time of the Essence ........................................................35
</TABLE>
v
<PAGE> 7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made as of November __, 1995, by and
between NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP, a Washington
limited partnership ("Buyer") and TCI CABLEVISION OF GEORGIA, INC., a Georgia
corporation ("Seller").
RECITALS
A. Seller currently is engaged in the business of providing cable
television service in or around the incorporated community of Swainsboro and
nearby unincorporated areas of Emanuel County, Georgia.
B. Buyer desires to purchase and Seller desires to sell and convey
substantially all of the assets of Seller used or useful in connection with such
cable television business, all as more particularly described below.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS
For the purposes of this Agreement, the following capitalized terms
shall have the respective meanings ascribed to them below (terms defined in the
singular shall have the same meanings when used in the plural, and vice versa):
1.1 Agreement shall mean this Asset Purchase Agreement, as amended,
supplemented or modified from time to time, including all agreements,
instruments and documents delivered in connection with this Agreement and all
Schedules and Exhibits annexed hereto.
1.2 Assets shall mean all properties, privileges, rights and interests,
real and personal, tangible and intangible, of every type and description in
which Seller has any right, title or interest, and that are owned, held, used,
or useful in the CATV Systems as of the Closing Date, except only for the
Excluded Assets as defined in Section 1.15. Assets include without limitation
the items which are listed in Schedule 1.2 (except only the Excluded Assets
listed in Schedule 1.15), and the following:
1.2.1 Cash and Cash Equivalents. All cash and cash equivalents
held by Seller and relating to converter and other subscriber deposits (but only
to the extent the refund obligations for the same are assumed by Buyer), all
subscriber prepayments, advertising prepayments and other prepaid revenues, and
all accounts receivable existing as of Closing with respect to the CATV Systems,
including but not limited to those Cash Equivalents described in Schedule 1.2,
but not including cash on hand, accounts or investments of any kind that are not
otherwise Cash Equivalents;
1.2.2 CATV Instruments. Franchises, licenses, crossing permits,
service agreements and all intangible CATV channel distribution rights or
privileges owned, used or held for use by Seller, including without limitation
those described in Schedule 1.2;
Asset Purchase Agreement Page 1
<PAGE> 8
1.2.3 CATV Equipment. All tangible personalty, furniture,
fixtures, office equipment and supplies, electronic devices, strand, trunk,
feeder, drop and other distribution cable, towers, antennae, poles, amplifiers,
power supplies, conduit, vaults, pedestals, grounding and pole hardware,
"headend" (origination, earth stations, transmission and distribution system)
hardware, motor and other vehicles, tools, construction equipment, test
equipment, maintenance equipment, spare parts, inventory and other personal
property and facilities owned, leased, used, or held for use in the CATV
Systems, and subscribers' devices to the extent owned by Seller (including,
without limitation, converters, encoders, transformers behind TV sets and
fittings), all of which includes, without limitation, those described in
Schedule 1.2;
1.2.4 Real Property. All realty, including appurtenances,
improvements, and fixtures located thereon, easements, and other such items,
owned or leased by Seller and used or held for use in the CATV Systems,
including Seller's fee and leasehold interests therein, and including without
limitation those items or interests described in Schedule 1.2;
1.2.5 Seller Contracts. All contracts, agreements and
other arrangements pertaining to the lawful ownership, operation and
maintenance of the CATV Systems or used in the CATV Systems, including without
limitation those described in Schedule 1.2; and
1.2.6 Intangibles. All general intangibles including, but not
limited to, subscriber lists, accounts receivable, notes receivable, options,
claims, patents, copyrights, registered trademarks, and goodwill.
1.3 Basic Package Services shall mean the package of cable
television programming, including broadcast and satellite service programming
(but excluding Pay-TV Services) offered at the monthly rate of $22.39 per
subscriber, as more particularly described in Schedule 1.8.
1.4 Basic Service Tier shall mean that level of cable services,
offered at the rate set forth in Schedule 1.8, that includes only (a) the
signals of off-air television broadcast stations, (b) the signals of television
broadcast stations that are secondarily transmitted by a satellite carrier
beyond the local service area of such stations, (c) local origination channels,
and (d) public, educational and governmental access channels.
1.5 Basic Subscriber shall mean, as of any date and for any
franchise area served by the CATV Systems, an individually billed residential
subscriber to Basic Package Services of the CATV Systems (which will not include
"additional outlets" or "second connects" as such terms are commonly understood
in the CATV industry), except any such subscriber (a) who is more than sixty
(60) calendar days past due (from the original due date as stated on the billing
statement) in the payment of any amount exceeding Ten Dollars ($10), (b) who has
not paid at least two (2) months' payment for Basic Package Services in full
without discount and all installation charges billed therefor, or (c) whose
service is pending disconnection for any reason.
1.6 Business Day shall mean any day other than Saturday, Sunday
or a day on which banking institutions in Denver, Colorado or Seattle,
Washington are required or authorized to be closed.
1.7 CATV shall mean cable television.
Asset Purchase Agreement Page 2
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1.8 CATV Systems shall refer to (a) Seller's complete CATV
reception and distribution systems as presently conducted by Seller in or around
the incorporated community of Swainsboro and nearby unincorporated areas of
Emanuel County, Georgia, consisting of one or more headends, trunk cable, feeder
cable, microwave transmission and reception facilities, drops and associated
electronic equipment, which are, or are capable of being, operated as an
independent system without interconnections to other CATV systems; and (b) all
of the Assets and business of such systems, as more particularly described in
Schedule 1.8.
1.9 CLI Rules shall refer to the Cumulative Leakage Index ("CLI")
standards under currently effective FCC rules and regulations.
1.10 Closing and Closing Date shall refer to the consummation of
transactions contemplated by this Agreement, to be held at the place and on the
date specified in Section 8.1. The day on which such meeting takes place shall
be referred to as the "Closing Date."
1.11 Code shall mean the Internal Revenue Code of 1986, and any
successor statute of similar import, and regulations thereunder, in each case as
in effect from time to time.
1.12 Equivalent Billing Units shall mean a hypothetical
equivalent to a Basic Subscriber determined, as of any date and for each
franchise area served by the CATV Systems, by dividing (a) the total monthly
billings for sales by the CATV Systems to bulk and commercial accounts for Basic
Package Services during the most recent full month ended prior to the date of
calculation, by (b) the standard monthly rate (without discount of any kind)
charged during such month to single family households for Basic Package Services
sold by the CATV Systems; except any such bulk subscriber (a) who is more than
sixty (60) calendar days past due (from the original due date as stated on the
billing statement) in the payment of any amount exceeding Ten Dollars ($10), (b)
who has not paid at least two (2) months' payment for Basic Package Services in
full without discount and all installation charges billed therefor, or (c) whose
service is pending disconnection for any reason.
1.13 Equivalent Subscribers shall mean, with respect to the CATV
Systems, the sum of (a) the number of Basic Subscribers and (b) the number of
Equivalent Billing Units.
1.14 ERISA shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar import, and
regulations thereunder, in each case as in effect from time to time.
1.15 Excluded Assets shall include: Seller's cash on hand at
Closing (but only to the extent that such cash does not constitute Cash
Equivalents under Section 1.2.1); all trade names, including but not limited to
the names "TCI," "TCI Cablevision of Georgia," "Tele-Communications, Inc." and
all derivatives thereof; all Prime Star accounts and DMX commercial accounts of
Seller; the pole attachment and retransmission consent agreements listed on
Schedule 1.15; all programming agreements; and only those other assets mutually
agreed to by the parties and listed in Schedule 1.15
1.16 FCC shall mean the Federal Communications Commission.
Asset Purchase Agreement Page 3
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1.17 Minimum Monthly Revenue shall mean Monthly Revenue of not
less than Ninety Two Thousand Three Hundred Dollars ($92,300).
1.18 Monthly Revenue shall mean the monthly average of the total
revenues, as defined under generally accepted accounting principles, derived
from the operation of the CATV Systems, excluding all revenues from the Prime
Star and DMX commercial accounts of Seller, during the Revenue Determination
Period.
1.19 Pay-TV Services shall mean one or more addition channels of
programming commonly known as premium or pay-television programming channels
not otherwise made available to Equivalent Subscribers without the payment of
monthly fees in addition to the fee for Basic Package Services.
1.20 Permitted Exceptions shall mean, with respect to ALTA
lessee's and owner's extended coverage title insurance policies, (a) standard
printed exceptions, (b) inchoate liens for current taxes and assessments not yet
delinquent, (c) existing zoning or similar laws or ordinances, (d) Security
Interests specifically assumed by Buyer pursuant to Section 4.1, (e) exceptions
added to the title commitment as a result of matters shown on any survey
obtained in accordance with Section 11.3.2, (f) standard mineral or water rights
exceptions, (g) rights reserved to any governmental authority under any
franchise, permit, or license and any right of any governmental authority to
regulate the affected property, and (h) any other encumbrances, easements,
liens, rights-of-way, covenants, restrictions, servitudes and imperfections or
irregularities in title; provided, however, that none of the foregoing
exceptions, individually or in the aggregate, will materially impair the present
use of the Real Property affected thereby, or otherwise cause material
interference with the operations of the CATV Systems.
1.21 Proforma Monthly Revenue shall mean the monthly average of
the total revenues, as defined under generally accepted accounting principles,
derived from the operation of the CATV Systems during the Revenue Determination
Period excluding (a) all revenues from the Prime Star and DMX commercial
accounts of Seller and (b) all revenues attributable to services or equipment
subject to a Rate Reduction Order that becomes effective during the Revenue
Determination Period, plus the product of (x) the rate(s) required to be charged
for services or equipment pursuant to a Rate Reduction Order and (y) the number
of units of service or equipment subject to a Rate Reduction Order actually
charged by Seller during the Revenue Determination Period.
1.22 Purchase Price shall mean the total consideration payable by
Buyer to Seller for the transactions contemplated in this Agreement, as more
particularly described in Section 3.1.
1.23 Rate Reduction Order shall mean any formal rate order with
respect to any CATV System from the FCC or any of the CATV Systems' local
franchising authorities, the effect of which is to require decreases in the
rates that may be charged for any services or equipment provided by any CATV
System.
1.24 Remedial Steps shall mean the necessary steps Seller will
have taken so as to have caused the CATV Systems to be in full compliance with
the Technical Standards.
1.25 Required Consents shall mean the written consents to be
obtained from governmental agencies, franchising authorities, lessors, and any
other third parties whose consents and approvals are reasonably necessary or
required for Seller to sell, transfer, assign, convey and deliver the Assets to
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Buyer and for Buyer to conduct the business of the CATV Systems and to own,
lease, use, and operate, as the case may be, the Assets at the places and in the
manner in which the CATV Systems and Assets are presently conducted or used and
will be conducted or used on the Closing Date.
1.26 Revenue Determination Period shall mean the three (3) full
calendar months ended immediately preceding the Closing Date.
1.27 Security Interest shall mean any mortgage, deed-of-trust,
lien, security agreement, limitation, pledge, hypothecation, assignment for
security purposes, option, put, charge, capital or financing lease arrangement,
priority, encumbrance, claim, suit, judgment or restraint on transfer
(including, without limitation, any agreement to give or suffer to exist any of
the foregoing) against title with respect to any Asset to be sold under this
Agreement.
1.28 Seller's Knowledge shall mean the actual knowledge of a
particular matter of any of the executive officers of Seller or on-site general
managers of the CATV Systems, after reasonable investigation of the CATV
Systems.
1.29 Technical Standards shall mean the standards set forth in
Section 5.8.3.
SECTION 2. SALE OF ASSETS
2.1 Agreement to Purchase and Sell. Subject to the terms and
conditions set forth in this Agreement, at Closing Buyer shall purchase and
Seller shall sell, transfer, assign, convey and deliver the Assets to Buyer.
2.2 Assets to Be Sold. Except as otherwise specifically provided
in this Agreement, all of the Assets, whether or not described in the Schedules
to this Agreement, are intended to be sold, transferred, assigned, conveyed and
delivered to Buyer, free and clear of all Security Interests.
SECTION 3. PURCHASE PRICE
3.1 Purchase Price. Buyer shall pay to Seller total consideration
of Six Million One Hundred Thousand Dollars ($6,100,000) (the "Purchase Price")
for the Assets, subject to adjustment as provided in Sections 3.2 and 3.3,
payable as follows:
3.1.1 Cash. At Closing, Buyer shall pay to Seller Five
Million Seven Hundred Ninety Five Thousand Dollars ($5,795,000) by wire transfer
of immediately available funds on the Closing Date; and
3.1.2 Escrow. At Closing, Buyer shall deposit into an escrow
account Three Hundred Five Thousand Dollars ($305,000), pursuant to an Escrow
Agreement substantially in the form of Exhibit G, which escrow account shall be
held back from Seller until the earlier of (i) one hundred twenty (120) days
after the Closing Date, or (ii) immediately after payment of the post- Closing
adjustment has been made as provided in Section 3.3. The escrow account shall be
subject to Buyer's continuing right to offset or recoup for post-closing
adjustments to be made pursuant to Section 3.3.
3.2 Adjustments and Prorations to the Purchase Price at Closing
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3.2.1 Shortfall Adjustments. The Purchase Price and the
portion thereof payable under Section 3.1.1 shall be reduced, by the formula in
either subsection (a) or (b) below, that yields the greater reduction, as
follows:
(a) Subscriber Shortfall Adjustment. If the CATV
Systems serve fewer than three thousand one hundred (3,100) Equivalent
Subscribers at the Closing Date, to an amount determined by multiplying
the Purchase Price by a fraction, the numerator of which is the greater
of (i) the actual number of Equivalent Subscribers at the Closing Date,
or (ii) 2,790, and the denominator of which is three thousand one
hundred (3,100);
(b) Monthly Revenue Shortfall Adjustment. If the
Monthly Revenue is less than the Minimum Monthly Revenue, to an amount
determined by multiplying the Purchase Price by a fraction, the
numerator of which is the greater of (i) the Monthly Revenue, or (ii)
ninety percent (90%) of the Minimum Monthly Revenue, and the
denominator of which is the Minimum Monthly Revenue. If a Rate Rollback
Order becomes effective during the Revenue Determination Period and as
a consequence thereof the Monthly Revenue is less than the Minimum
Monthly Revenue, to an amount determined by multiplying the Purchase
Price by a fraction, the numerator of which is the greater of (i)
Proforma Monthly Revenue or (ii) seventy- five percent (75%) of the
Minimum Monthly Revenue, and the denominator of which is the Minimum
Monthly Revenue.
3.2.2 Prorations and Other Adjustments
(a) Prorations. In addition to the adjustments
described in Section 3.2.1, appropriate adjustments to the Purchase
Price and the portion thereof payable under Section 3.1.1 shall be made
on a prorata basis as of the Closing Date to the extent reasonably
possible for all prepaid expenses, accrued expenses and prepaid
revenue, all as determined in accordance with generally accepted
accounting principles, to reflect the principle that all expenses
arising out of and all income attributable to the CATV Systems for the
period prior to 11:59 p.m. local time on the Closing Date are for the
account of Seller, and that all expenses arising out of and all income
attributable to the CATV Systems for the period after 11:59 p.m. local
time on the Closing Date are for the account of Buyer. All overlapping
items of income or expense, including without limitation the following,
shall be prorated or reimbursed, as the case may be, as of 11:59 p.m.
local time on the Closing Date:
(i) Prepaid expenses and deposits
(including without limitation lessee security deposits) made
prior to Closing, as permitted by the terms hereof, for or in
connection with goods or services where all or a part of such
goods or services have not been received or used as of the
Closing Date (e.g., rents paid in advance for a rental period
extending beyond the Closing Date);
(ii) Liabilities customarily accrued,
arising from expenses incurred but unpaid as of Closing,
including without limitation liabilities under any and all
obligations assumed by Buyer pursuant to Section 4.1 (e.g.,
rents, sales commissions, fees for business and professional
services, and other similar matters);
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(iii) Taxes and utility charges related to
the CATV Systems or in respect of any of the Assets (other
than state sales taxes that may be due as a consequence of
the consummation of the transactions contemplated by this
Agreement, and any taxes that may be imposed upon Buyer on
the basis of Buyer's income);
(iv) Deposits made and unearned prepayments
received by Seller in connection with any of Seller's
obligations assumed by Buyer pursuant to Section 4.1; and
(v) Franchise fees, copyright payments,
railroad and/or highway crossing charges, satellite service
fees, antenna space leases, billing company charges, and
other fees, expenses, costs and charges normally prorated in
the sale of the assets of a CATV business.
No payments or adjustments shall be made with respect to any Excluded
Assets.
(b) Pre-Closing Procedure. At least five (5) Business
Days before Closing, Seller shall notify Buyer of Seller's good faith
estimate of (i) the Equivalent Subscribers and the Monthly Revenue as
of the Closing Date, and (ii) any adjustments or prorations required by
this Section 3.2. If such estimate will result in a reduction to the
Purchase Price, then the amount to be paid by Buyer at Closing shall be
preliminarily reduced by such estimate. Prior to Closing, Seller shall
provide Buyer or Buyer's representatives with copies of or reasonable
access to all books and records, subscriber work orders, billing
reports, bank statements and related documentation as Buyer may
reasonably request for purposes of verifying the matters set forth in
such notification, but without limiting Seller's obligations hereunder
to certify the accuracy of all adjustments. Seller and Buyer shall work
together in good faith to resolve on or before the Closing Date any
disagreement with respect to any matter set forth in such notification.
3.2.3 Adjustment for Cost of Escrow. The Purchase Price and the
portion thereof payable under Section 3.1.1 shall be reduced by the amount
payable by Seller for one-half (1/2) of the fees and expenses payable under the
Escrow Agreement in substantially the form attached hereto as Exhibit E.
3.2.4 Adjustment for Accounts Receivable. The Purchase Price
and the portion thereof payable under Section 3.1.1 shall be increased by the
value of Seller's accounts receivable existing as of the Closing Date with
respect to subscribers to the CATV Systems in accordance with the following:
(i) For accounts receivable aged zero (0) through thirty
(30) days, one hundred percent (100%) of the aggregate
amount of such accounts receivable; and
(ii) For accounts receivable aged thirty one (31) through
ninety (90) days, eighty-five percent (85%) of the
aggregate amount of such accounts receivable.
No adjustments to the Purchase Price shall be made with respect to accounts
receivable aged over ninety (90) days. The age of such accounts receivable shall
be measured from the original due date of billing as stated on Seller's billing
statements.
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3.3 Post-Closing Adjustments
3.3.1 Procedure. As soon as practicable, but in any event
within sixty (60) calendar days after the Closing Date, Seller shall prepare and
deliver to Buyer a certificate setting forth the final determination of all
adjustments which were not calculated for Seller's pre-Closing notification
pursuant to Section 3.2.2(b) and setting forth any corrections to the pre-
Closing notification as may be reasonably necessary to support any final
adjustments made in such certificate. After such certificate has been delivered,
Buyer shall have a period of fifteen (15) calendar days to review such
certificate and to present objections, if any, to Seller. Buyer shall grant to
Seller or Seller's representatives reasonable access to Buyer's books and
records as Seller may reasonably request for purposes of preparing such
certificate. Such certificate shall be final and conclusive unless objected to
by Buyer in writing within such 15-calendar day period. During the fifteen (15)
calendar days after Seller's receipt of any such written objection from Buyer,
Seller and Buyer shall attempt to reach agreement upon the proper prorations and
adjustments called for in Section 3.2. A payment shall be made by Seller or
Buyer within five (5) Business Days after any such agreement as to the proper
undisputed amounts, taking into account any preliminary adjustment for such
items made at Closing. If Seller and Buyer are unable to agree upon the proper
amount of any such adjustment within such 15-calendar day period, then the
amounts in dispute shall be submitted to an accounting firm mutually acceptable
to Buyer and Seller, which shall render a written decision to Seller and Buyer
within thirty (30) calendar days after it has been retained, which decision
shall be final, and whose fees shall be paid one-half by Buyer and one-half by
Seller.
3.3.2 Property Taxes. If the amount of any real or personal
property tax to be prorated is not known on the Closing Date, such tax shall be
apportioned on the basis of the most recent tax assessment; except, however, if
there is a re-assessment pending or threatened with respect to the property
being taxed, then the parties shall mutually agree to an appropriate
apportionment taking into account such pending or threatened re-assessment.
3.4 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets in such amounts as set forth in Schedule 3.4. Buyer
and Seller agree to be bound by such allocation and to file according to Code
Section 1060, all returns and reports with respect to the transaction
contemplated by this Agreement, including, but not limited to, all federal,
state, and local tax returns, on the basis of such allocation. In the event the
Purchase Price is adjusted pursuant to Sections 3.2 or 3.3, the difference shall
be allocated among appropriate categories on a prorata basis unless such
differences are specifically allocable in whole or in part to a particular
category or categories as mutually agreed by Buyer and Seller.
SECTION 4. ASSUMPTION OF LIABILITIES
4.1 Assignment and Assumption. All of Seller's obligations with
respect to the CATV systems are set forth in the agreements listed in schedule
1.2. Except only as specifically provided in this section 4.1, Buyer shall
assume only (a) the obligations of Seller set forth on schedule 4.1 that accrue
after the closing date, and (b) Seller's obligations to subscribers of the CATV
systems that accrue after the closing date with respect to (i) subscriber
deposits held by Seller (and for which buyer receives credit) as of the closing
date which are refundable, and (ii) subscriber advance payments held by Seller
(and for which buyer receives credit) as of the closing date for services to be
rendered in connection with the operation of the CATV systems subsequent to the
closing date (collectively, the
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"Assumed Liabilities"). If and to the extent that Seller, in the ordinary course
of business consistent with past practices, enters into written agreements with
parties not affiliated with Seller after the date of this Agreement but before
the Closing Date that have terms of less than ninety (90) days and have payment
or performance obligations of less than Forty Thousand Dollars ($40,000),
individually or in the aggregate, Buyer shall assume all of such agreements as
part of the Assumed Liabilities. Buyer shall assume any other agreements entered
into by Seller to the extent Buyer has provided Seller with its express written
approval of such agreements. At Closing, Seller shall assign and Buyer shall
assume the Assumed Liabilities. Such agreement for assignment and assumption
pertaining to CATV Instruments and Seller Contracts shall, to the extent
reasonably possible, be in the form of Exhibits B or C. Such agreement
for assignment and assumption pertaining to Real Property shall, to the extent
reasonably possible, be in the form of Exhibit D.
4.2 Limitation of Liability . It is expressly understood and
agreed that Buyer shall not be liable for, and does not assume, any obligations
or liabilities of Seller of any kind or nature, other than the Assumed
Liabilities. Except as otherwise set forth herein, Buyer shall be under no
obligation to, and shall not, assume any obligation, liability or indebtedness
of Seller or the CATV Systems, including without limitation any and all fines,
penalties, or forfeitures levied or assessed by the FCC, the Copyright Office,
any franchising authority, or any other governmental entity after Closing, to
the extent that such fines or penalties relate to the period prior to Closing.
4.3 Sales and Transfer Taxes; Third-Party Consents. Buyer shall
assume the liability for and shall pay any and all reasonable costs, fees and
taxes associated with the consummation of the transactions contemplated by this
Agreement; provided, however, that Buyer shall not be obligated either to pay
any unreasonable fees or expenses or to undertake any unreasonable obligations
as a part of Buyer's performance. If Buyer and Seller determine that
extraordinary measures are necessary to obtain the consent or agreement to any
part of the transactions contemplated by this Agreement of any governmental
authority or any independent third-party with whom Seller is contractually
bound, any extraordinary fees or expenses, or the initiation or prosecution of
legal proceedings shall be paid one-half by Seller and one-half by Buyer. Seller
shall assume the liability for and shall pay any and all taxes that may be
imposed on Seller on the basis of Seller's income. Notwithstanding the
foregoing, unless specifically set forth herein, each party shall bear the
expenses of its own attorneys, accountants and experts.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Buyer to enter into this Agreement, Seller represents and
warrants to Buyer as follows:
5.1 Organization and Authority. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia and is qualified to transact business in all other jurisdictions in
which the failure to so qualify would have a material adverse effect on its
business or properties; openly and lawfully does business under the names "TCI"
and "TCI Cablevision of Georgia" but no other name; has full power and authority
to execute, deliver, and perform this Agreement; has all requisite power and
authority to carry on its business as currently conducted and to own, lease,
use, and operate the Assets at the places they are located and in the manner in
which the CATV Systems are operated; and has taken all corporate action required
by law, its articles of incorporation and otherwise, and as of Closing shall
have used its commercially reasonable efforts to
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have obtained all Required Consents and shall have received all necessary
corporate consents and approvals, including without limitation the approval of
the directors of Seller, to authorize the execution, delivery, and performance
of this Agreement. Seller has not, within the four (4) year period immediately
preceding the date of this Agreement, changed its name, been the surviving
entity of a merger or consolidation, or acquired all or substantially all of the
assets of any person, company or entity.
5.2 Schedules. The Schedules to this Agreement, as the same may
be amended or supplemented pursuant to Section 15.9 , list all of the material
Assets owned, held, or used for the performance of any CATV Instrument or Seller
Contract and for the lawful conduct of the CATV Systems. All Schedules to this
Agreement, as the same may be amended or supplemented pursuant to Section 15.9
are true, accurate, and complete in all material respects.
5.3 No Breach or Violation. To Seller's Knowledge, the execution,
delivery, and performance of this Agreement will not (a) conflict with or result
in a breach or violation by Seller of, or (b) constitute default by Seller
under, or (c) create or impose any Security Interest or right of termination,
cancellation, or acceleration with respect to any of the Assets pursuant to, any
statute, ordinance, rule, regulation, or order, or any material agreement,
lease, instrument, document or arrangement affecting the CATV Systems or the
Assets or any part thereof, to which Seller is a party or by which Seller or the
Assets are bound, except such conflicts, breaches, violations, defaults,
security interests, terminations, cancellations or accelerations as would not,
individually or in the aggregate, have a material adverse effect on the
validity, binding effect or enforceability of this Agreement, on the CATV
Systems, or on the ability of Seller to perform its obligations under this
Agreement. This Agreement constitutes the legal, valid, and binding obligation
of Seller, enforceable in accordance with its terms, except insofar as
enforceability may be affected by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws now or hereafter in effect affecting
creditors' rights generally or by principles governing the availability of
equitable remedies.
5.4 Title to Assets. Seller has good, marketable and indefeasible
title, both legal and equitable, to all of the Assets which are owned, and a
valid leasehold interest in all of the Assets which are leased; and the Assets
are free and clear of all Security Interests of any kind or nature, subject only
to (a) Permitted Exceptions with respect to Real Property, and (b) those
Security Interests disclosed in Schedule 5.4, which Security Interests shall be
removed and released at or prior to Closing, unless assumed by Buyer.
5.5 Real Property. With respect to all Real Property:
5.5.1 Zoning. To Seller's Knowledge, the Real Property and
the improvements located thereon and the continuation of business presently
being conducted thereon do not violate any applicable material zoning laws.
5.5.2 Access; Utilities. The Real Property is served by all
utilities and services, including without limitation electrical power, water,
sewer and telephone, reasonably necessary for the normal and intended use of the
Real Property in connection with the operation of the CATV Systems.
5.5.3 Effectiveness of Leases. To Seller's Knowledge, all
leases of Real Property are currently in full force and effect and are valid and
enforceable in accordance with their respective terms under all applicable laws.
Seller is in compliance with all of the material requirements and obligations
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under all such leases, and there is no pending assertion or claim by any party
that Seller is in default or otherwise not in compliance with all such leases.
5.5.4 Easements. Except as disclosed in Schedule 5.5.4,
Seller owns and possesses all material easements and rights-of-way necessary for
the operation, maintenance, repair, replacement, and current location of all
cables, lines, towers, poles, equipment, and other facilities used or useful in
connection with the operation of the CATV Systems.
5.5.5 Environmental Matters
(a) Definitions. For purposes of this Section 5.5.5,
the following terms shall have the following meanings:
(i) Hazardous Substance. "Hazardous Substance"
shall mean any chemical, substance, material, or waste,
including without limitation asbestos, PCBs and formaldehyde,
that is defined, classified, listed, or designated as
hazardous, toxic, or radioactive, or by other similar term,
by any federal, state, or local environmental statute,
regulation, rule, order, or ordinance presently in effect.
(ii) Environmental Laws. "Environmental Laws" shall
mean all federal, state and local laws and regulations in
effect as of the Closing Date relating to emissions,
discharges, releases or threatened releases of Hazardous
Substances into the environment (including without limitation
the atmosphere, ambient water, surface water, ground water or
land surface or sub-surface) or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of Hazardous
Substances.
(b) Presence. Except as set forth on Schedule 5.5.5, to
Seller's Knowledge (i) there has been no storage, spill, release,
discharge, emission, or disposal of any Hazardous Substance that has
occurred or is presently occurring in, upon, or onto the Real Property
in violation of any Environmental Law; and (ii) there is no underground
storage tank on the Real Property.
(c) Pending Proceedings. Except as set forth on
Schedule 5.5.5, there is no pending civil or criminal litigation,
notice of violation, investigation or administrative proceeding arising
out of the business or activities of Seller, including without
limitation any pending litigation, inquiry, investigation or proceeding
relating in any way to the Environmental Laws, nor, to Seller's
Knowledge, are any of the foregoing threatened.
5.6 Required Consents. Schedule 5.6 sets forth a true, correct
and complete list of all Required Consents.
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5.7 CATV Instruments and Seller Contracts
5.7.1 Effectiveness. Except as disclosed in Schedule 1.2, the
CATV Instruments and all material Seller Contracts (i) are currently in full
force and effect, (ii) are valid and enforceable in accordance with their
respective terms under all applicable federal, state, and local laws, except
insofar as enforceability may be affected by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws now or hereafter in effect affecting
creditors' rights generally or by principles governing the availability of
equitable remedies, and (iii) include all material licenses, rights of entry,
permits, and other rights and authorizations, necessary to enable Seller to
operate the CATV Systems as and in the manner in which they presently are
conducted and in accordance with all applicable federal, state and local laws.
Seller is not in default under or violation of any material provision of any
CATV Instrument or Seller Contract. Except as disclosed in Schedule 1.2, there
is no dispute, legal action, governmental proceeding or investigation, pending
or, to Seller's Knowledge, threatened, for the purpose of modifying, revoking,
terminating, suspending, canceling, or reforming any CATV Instrument or Seller
Contract, or seeking damages or other relief with respect thereto. Except as
disclosed in Schedule 1.2, Seller is in material compliance with the applicable
requirements of all governing or regulatory authorities (including without
limitation the FCC and the Copyright Office) relating to the CATV Instruments
and Seller Contracts, including, without limitation, all requirements relating
to notification, filing, document delivery, reporting, posting, maintenance of
logs and records and payment of fees or other amounts due. Except as set forth
in Schedule 5.11, there is no pending assertion or claim by any governmental
authority or counter-party to any CATV Instrument or Seller Contract that
operations pursuant to such CATV Instruments or Seller Contracts have been
improperly conducted or maintained. As of Closing, a request for renewal has
been filed under Section 626 of the Cable Communications Policy Act of 1984 with
respect to all franchises expiring within thirty-six (36) months of the date of
this Agreement.
5.7.2 Copies. Seller has delivered to Buyer true, correct and
complete copies of all material CATV Instruments and material Seller Contracts
and any amendments to such material CATV Instruments and material Seller
Contracts to the date of this Agreement. Seller has delivered to Buyer copies of
all renewal notices filed under Section 626 of the Cable Communications Policy
Act of 1984 with respect to all franchises expiring within thirty-six (36)
months of the date of this Agreement.
5.8 FCC Compliance
5.8.1 General Compliance. As of Closing, Seller shall be duly
authorized under applicable CATV Instruments and FCC rules, regulations, and
orders to distribute all of the off-air television and radio broadcast signals
presently being cablecast to the subscribers of the CATV Systems and to utilize
all carrier frequencies generated by the CATV Systems, and shall be duly
licensed to operate all the property, equipment and facilities, including,
without limitation, any business radio and any CATV relay service system, being
operated in connection with the CATV Systems. As of Closing, the operation of
the CATV Systems and of any FCC-licensed facility used in conjunction with the
operation of the CATV Systems shall be in material compliance with the FCC's
rules and regulations and, to the extent applicable, the rules and regulations
of the Federal Aviation Administration, and Seller has received no notice, and
otherwise has no reason to know, of any claimed default or material violation
with respect to the foregoing. Prior to Closing, Seller will have delivered to
Buyer copies of all current and past reports and filings for the immediately
past two years as may be necessary for Buyer to evaluate Seller's compliance
with FCC rules and regulations. As of Closing, Seller will have materially
complied with and will have provided Buyer with true, correct and complete
copies of all valid Syndicated
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Exclusivity, Network Nonduplication and Sports Blackout requests and all notices
received by Seller with respect to any of the signals carried on the CATV
Systems. Schedule 5.8.1 sets forth a true, correct and complete list of (a) all
local franchising authorities of the CATV Systems that have exercised authority
pursuant to Section 76.309(a) of the FCC's rules to enforce customer service
standards, (b) all local franchising authorities of the CATV Systems that have
sought certification from the FCC to regulate rates and adopted regulations to
administer such rate regulation, and (c) all complaints filed with the FCC with
respect to rates charged by the CATV Systems. Prior to Closing, Seller will make
available for Buyer's inspection and at Closing Seller will deliver to Buyer
true and correct copies of all current and past reports, filings and notices,
for the immediately past two years, of the following (if and to the extent the
same are available):
(i) The CATV Systems' political file maintained
pursuant to Section 76.207 of the FCC's rules.
(ii) The CATV Systems' advertising and sponsorship
identification file maintained pursuant to Section 76.221(f)
of the FCC's rules.
(iii) The CATV Systems' paid political advertising
file maintained pursuant to Section 76.221(d) of the FCC's
rules.
(iv) The CATV Systems' file on commercial matter on
children's programs maintained pursuant to Section 76.225(c)
of the FCC's rules.
(v) The CATV Systems' proof of performance test
data, including an identification of the instruments, a
description of the procedures utilized, and a statement of
the qualifications of the person performing the tests, from
the semi-annual performance tests required pursuant to
Section 76.601(c) of the FCC's rules.
(vi) The CATV Systems' written policy statement and
all records relating to indecent leased access programming
pursuant to Section 76.701(h) of the FCC's rules, and a
schedule of Seller's commercial leased access rates pursuant
to Section 76.970(e) of the FCC's rules.
(vii) Records of complaints from subscribers of the
CATV system concerning the quality of the television signals
delivered together with Seller's correspondence and other
records of how such complaints were resolved.
(viii) Letters to off-air broadcasters sent
pursuant to Section 76.58 of the FCC's rules.
(ix) FCC Forms 393, 1200, 1210 and 1215 as
submitted to the FCC and/or any of the CATV Systems'
franchising authorities, together with any correspondence,
notices or other documentation related thereto.
(x) The CATV Systems' notices to subscribers sent
pursuant to Sections 76.56(d)(3), 76.309(c)(3), 76.607,
76.630(a), 76.630(d), 76.630(e), 76.802, 76.931, 76.932,
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76.964, 76.952, and 76.980(d) of the FCC's rules, and the
notice sent to subscribers pursuant to Section 624(d) of the
Communications Act of 1934, as amended.
5.8.2 CLI Compliance. As of Closing, Seller shall have
materially complied with its obligations in connection with the CLI Rules
including, without limitation, (a) using reasonably adequate CLI monitoring
equipment, (b) maintaining appropriate log books and other record-keeping
pursuant to and in accordance with Section 76.601(e) of the FCC's rules, and (c)
promptly correcting any radiation leakage discovered by Seller in connection
with its monitoring obligations under the CLI Rules.
5.8.3 Tests and Compliance with Technical Standards. During
the one-year period prior to the execution of this Agreement, Seller completed
each of the following tests in the manner specified below. When such tests were
conducted, the CATV Systems were operated at the power levels specified in the
CATV Systems' technical design. Each of the CATV Systems complied with the
standards set forth in Sections 5.8.3(a) and (e), and each of the CATV Systems
that serves greater than 1,000 subscribers complied with the standards set forth
in Sections 5.8.3(a), (b), (c), (d) and (e).
(a) Signal Leakage and CLI Certification. Pursuant to
the rules of the FCC and in accordance with the standards generally accepted by
qualified engineers in the CATV industry, Seller conducted a ground-based signal
leakage test on the CATV Systems. The CATV Systems' CLI, as determined by using
the Ii method was equal to or less than 58. Results of the signal leakage test,
together with a log covering the three year period immediately preceding the
date of this Agreement of all detected leaks and a description of the repairs
effected, have been delivered to Buyer.
(b) Proof of Performance. Seller performed an
end-to-end swept frequency response test of all the trunk facilities of the CATV
Systems from 50 to 350 MHz, and demonstrated a "peak-to-valley" ratio of less
than 3dB between adjacent channels and less than 10dB between all other
channels.
(c) Carrier to Noise. Seller performed carrier to noise
ratio testing on an adequate number of channels, including at least the highest
and lowest channels carried on each CATV System, and demonstrated a ratio of
better than 43 dB on the channels tested.
(d) Hum Modulation. Seller performed hum modulation
testing on an adequate number of channels, including at least the highest and
lowest channels carried on each CATV System, and demonstrated hum disturbances
of less than three percent on the channels tested.
(e) Aeronautical Frequencies. All aeronautical
frequencies used by the CATV Systems have been maintained within 5 KHz +/- of
the authorized offset frequency.
5.8.4 Payment of FCC Regulatory Fees and Fines.
Seller has, prior to Closing, paid in full any and all FCC regulatory fees due
in connection with the operation of the CATV Systems and any and all fines,
penalties, or forfeitures levied or assessed by the FCC as a result of the
failure of any portion of the CATV Systems to comply with the CLI Rules, the
standards prescribed in Section 5.8.3, or any other FCC rules. Seller
shall remain responsible for (and shall pay in full) any such fines, penalties,
or forfeitures levied or assessed by the FCC after Closing, to the extent that
the same (i) relate to the period prior to Closing, and (ii) have been
determined to be valid.
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5.8.5 Carriage of Broadcast Signals. Schedule 5.8.5 sets
forth a true, correct and complete list of all television broadcast stations
carried on the CATV Systems and designates whether the stations' signals are
carried pursuant to the must-carry provisions of the FCC's rules or pursuant to
retransmission consent agreements.
5.9 Copyrights, Patents and Trademarks
5.9.1 Copyright Filings. Except as set forth in Schedule
5.9.1, Seller has timely made all requisite filings with and payments to the
Register of Copyrights and is otherwise in material compliance with all
applicable rules and regulations of the Copyright Office. Seller has delivered
to Buyer copies of all current and past reports and filings within the past
three (3) years reasonably necessary to evidence such compliance with Copyright
Office rules and regulations.
5.9.2 Copyright Infringement. To Seller's Knowledge, the
Assets and the programming offered over the CATV Systems are free and clear of
any rightful claim of any third person by way of copyright infringement. The
manner in which the off-air broadcast signals and other program services are
offered over the CATV Systems will not result in additional reportable gross
receipts under applicable rules and regulations of the Copyright Office.
5.9.3 Payment of Copyright Royalties and Fines. Seller has,
prior to Closing, paid in full any and all copyright royalties due in connection
with the operation of the CATV Systems and any and all fines, penalties or
forfeitures levied or assessed by the Copyright Office as a result of the
failure of the CATV Systems to comply with the rules of the Copyright Office.
Seller shall remain responsible for (and shall pay in full) any such fines,
penalties or forfeitures levied or assessed by the Copyright Office after
Closing, to the extent that the same (i) related to the period prior to Closing,
and (ii) have been determined to be valid.
5.9.4 Patents, Trademarks. Seller does not possess any
patent, patent right, trademark, copyright or other proprietary intellectual
property necessary or desirable for the operation of the CATV Systems, and is
not a party to any license or royalty agreement with respect to any patent,
trademark, or copyright necessary or desirable for the operation of the CATV
Systems, except for licenses respecting program material and obligations under
the Copyright Act of 1976 applicable to CATV systems generally. To Seller's
Knowledge, neither Seller (with respect to the CATV Systems) nor the CATV
Systems is infringing on the patent, trademark or other intellectual property
rights of any party.
5.10 Assets and CATV Business
5.10.1 Generally. Except as expressly set forth in the
Schedules to this Agreement or as waived by Buyer, at Closing all Assets shall
be in operating condition, ordinary wear and tear excepted, for use in the
operation of a cable television system. None of the CATV Systems, or the
buildings, structures, or appurtenances used in the CATV Systems, violates
applicable laws, ordinances, codes, regulations or restrictive covenants, the
compliance with which would involve a material cost to correct, would materially
detract from their value, or would materially interfere with their use in the
operation of a cable television system. Except as expressly set forth in the
Schedules, the CATV Systems are properly located and materially comply with all
applicable laws, rules and regulations. Seller has not received any notice
heretofore not complied with, from any federal, state, local or other
governmental authority or agency having jurisdiction over the CATV Systems or
the Assets, or any
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insurance or inspection body, that the CATV Systems or the Assets fail to
materially comply with any applicable law, ordinance, regulation, building or
zoning law, or the requirements of any public authority or body. The CATV
Systems and the Assets are suitable for continued use in the manner in which
they are presently operated without the need for repairs or replacement, except
for the repairs and maintenance normally arising in the ordinary course of
business of a cable system of similar age and geographic location.
5.10.2 Cable Plant Design and Performance. All cable used in
the CATV Systems is coaxial, and, except for such conditions as might be
expected for a cable system of its age and geographic location, is water-tight
and joined and connected according to normal and customary industry standards.
The CATV Systems, at the Closing Date, shall have no fewer than 100.92 strand
miles and 106.37 plant miles (consisting of 65.45 aerial trunk miles, 78.13
aerial distribution miles, 2.65 underground trunk miles and 2.80 underground
distribution miles), excluding service drops, and shall be capable of operations
(in accordance with the Technical Standards) at the capacity level of 350 MHz.
5.11 Litigation and Proceedings. Except as set forth in Schedule
5.11, there is no litigation at law, or in equity, and there is no other
proceeding or investigation pending or, to Seller's Knowledge, threatened,
against Seller which reasonably would, if adversely determined, individually or
in the aggregate, have a material adverse effect on the CATV Systems or on
Seller's ability to perform its obligations under this Agreement, and Seller
does not know of any basis for such litigation or proceedings. Seller is not
materially in default in any manner with respect to any order, writ, injunction,
or decree of any court or federal, State, municipal, or other governmental
department, commission, board, bureau, agency, or instrumentality which relates
to the operation of the CATV Systems, and Seller has materially complied with
all laws, rules, or regulations applicable to the CATV Systems and the operation
thereof.
5.12 Tax Returns; Other Reports. Seller has duly and timely filed
in proper form all federal, state, local, and foreign income, franchise, sales,
use, property, excise, payroll, and other tax returns and all other reports
(whether or not relating to taxes) required to be filed by law with any
governmental authority or agency thereof. All taxes, fees and assessments of
whatever nature due or payable by Seller pursuant to said returns, reports, or
otherwise, have been paid. There are no tax audits pending and no outstanding
agreements or waivers extending the statutory period of limitations applicable
to any federal, state, or local income tax return for any period.
5.13 Employment Matters
5.13.1 Employees. Schedule 5.13.1 contains a true and
complete list of the names and positions of all employees of Seller whose work
is primarily for the CATV Systems. Seller has materially complied with all
applicable laws relating to the employment of labor, including, without
limitation, ERISA, and those relating to wages, hours, collective bargaining,
unemployment insurance, worker's compensation, equal employment opportunity and
the payment and withholding of taxes.
5.13.2 Employment Relationship. Seller has no employment
agreements, either written or oral, with any person which would require Buyer to
employ any person after the Closing Date.
5.13.3 Unions. Seller is not a party to any contract with any
labor organization, and neither has Seller agreed to recognize any union or
other collective bargaining unit, nor has any union or
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other collective bargaining unit been certified as representing any of its
employees who work primarily for the CATV Systems nor has Seller received any
requests from any party for recognition as a representative of such employees
for collective bargaining purposes.
5.13.4 Benefits. At Closing, Seller shall have the
sole responsibility for, and Buyer shall not be required to continue, any
defined benefit, defined contribution, or other employee benefit plan subject to
the jurisdiction of ERISA to which Seller is currently a party or by which
Seller is bound.
5.13.5 Plans. Seller shall have the sole
responsibility for maintenance and/or distribution of benefits accrued under any
qualified plans maintained by Seller pursuant to the plan provisions of all such
plans sponsored by Seller, if any. Buyer will not assume any liability for (a)
any such accrued benefits or (b) any fiduciary or administrative responsibility
to account for or dispose of any such accrued benefits maintained under any
qualified plans sponsored by Seller.
5.13.6 Seller's Responsibility. All welfare plan
claims and short- or long-term disability plan obligations incurred on or before
the Closing, if any, shall remain the sole responsibility of Seller. Eligible
indemnity plan expenses attributable to any of Seller's covered employees or
dependents who are confined to a hospital or medical institution on the date of
the Closing will continue to be the responsibility of Seller to the extent
required under Seller's applicable plans.
5.13.7 Health Care Continuation. There has been no material
failure to comply with the continuation health care requirements of the Code or
related acts, laws, rules and regulations as such requirements have applied or
currently apply to any current or former employee of Seller or any spouse,
former spouse, dependent child, or former dependent child of any such employee
under any group health plan maintained by or for Seller on or prior to the
Closing Date.
5.13.8 Miscellaneous Federal Acts. Seller's present
employment practices materially comply with all rules and standards set by the
Americans With Disabilities Act of 1990, Pub. L. 101-36, as amended, and the
Family and Medical Leave Act of 1993, Pub. L. 103-3 including any regulations
promulgated thereunder.
5.13.9 FCC Filings. Schedule 5.13.9 contains true, correct
and complete copies of Seller's FCC Form 395-A filings, which Seller filed on or
before the applicable deadlines, beginning with the Form 395-A filed two years
before such form filed at the latest applicable deadline.
5.14 Subscribers Fees and Rates. The monthly rates currently
charged by Seller for each of the services offered on the CATV Systems are as
set forth in Schedule 1.8. Except as set forth in Schedule 5.14, Seller has not
been ordered by the FCC or any of the CATV Systems' local franchising
authorities to reduce the rates charged for any of the regulated services and
equipment listed in Schedule 1.8 nor is any such order threatened. Seller
increased the rates charged for regulated services and equipment on May 1, 1995
for Pay-TV Services. Seller increased the rates charged for regulated services
and equipment on July 1, 1995 for Basic Package Services.
5.15 Insolvency Proceedings. No insolvency proceedings of any
character, including without limitation bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, affecting Seller or the CATV Systems are pending or, to Seller's
Knowledge, threatened. Seller has not made an assignment for the benefit of
creditors or taken any action with a
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view to, or that would constitute a valid basis for, the institution of any such
insolvency proceedings. On the Closing Date, Seller (i) will have sufficient
capital to carry on its business and transactions, and (ii) will be able to pay
its debts as they mature or become due.
5.16 Finders and Brokers. Neither Seller nor its officers,
directors, shareholders or employees has entered into any contract, arrangement,
or understanding with any person or firm which may result in the obligation of
Seller or Buyer to pay any finder's, brokerage, or agent's fees, commission or
other like payment or compensation due to the transactions contemplated in this
Agreement. For the two year period prior to the date of this Agreement, Seller
has not entered into any agreement, whether written, oral, express or implied,
directly or indirectly regarding the sale or other disposition of the CATV
Systems.
5.17 Citizenship. Seller is not a "foreign person" as defined
in Section 1445(f)(3) of the Code. Buyer shall have the right to furnish copies
of any Seller affidavit of such representation to the Internal Revenue Service.
5.18 Overbuilds; Competition. To Seller's Knowledge, no area
presently served by the CATV Systems or within the scope of any of Seller's CATV
franchises is presently subject to an overbuild situation or subject to
competition from a multipoint distribution service ("MDS"), multichannel
multipoint distribution service ("MMDS") or other wireless cable services,
except for Prime Star and DMX. To Seller's Knowledge, no person or firm other
than Seller has been granted a CATV franchise, or a license to provide MDS, MMDS
or other wireless cable services in any of the communities (or any of the
unincorporated areas) presently served by the CATV Systems or within the
geographical scope of any of Seller's CATV franchises. To Seller's Knowledge, no
person or firm (a) intends to construct or operate a CATV system or to provide
MDS, MMDS or other wireless cable services within any area served by the CATV
Systems or any area within the geographical scope of any of Seller's CATV
franchises, or (b) intends to apply for a CATV franchise or a license to provide
MDS, MMDS or other wireless cable services covering any area served by the CATV
Systems or any area within the geographical scope of any of Seller's CATV
franchises.
5.19 Financial Statements. To Seller's Knowledge, the CATV
Systems' unaudited financial statements, including without limitation balance
sheets, income statements and any and all other related documents, the most
recent of which are attached as Schedule 5.19: (i) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the period involved and as compared with prior periods; (ii)
are true, correct, complete and accurate in all material respects subject, in
the case of any interim statements, to year-end adjustments where applicable,
and (iii) fairly present Seller's financial position, income, expenses, assets,
liabilities, shareholders' equity and the results of operation of the CATV
Systems as of the date and for the period indicated. There has been no material
adverse change in the business, assets, properties, prospects, or condition
(financial or otherwise) of the CATV Systems since the preparation of the most
recent financial statements delivered to Buyer.
5.20 Free CATV Service. Except as set forth in Schedule
5.20 to this Agreement, there is no agreement, obligation or other
requirement for Seller to provide free CATV service to any person, entity or
firm.
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5.21 Pole Attachments. Seller has substantially complied in all
material respects with the obligations imposed on it pursuant to any of its
agreements with utility companies providing for the attachments of the CATV
Systems' facilities to utility poles or for the placement of the CATV System's
facilities in ducts or conduit. Without limiting the generality of the
foregoing, Seller has timely completed and paid all costs associated with all
pole make-ready, change-out, reconfiguration, relocation or other similar work
requirements. All of the CATV Systems' pole attachments have been timely and
properly reported to the respective pole owners and the number of attachments
reported by Seller in Schedule 1.2 is materially correct.
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES
6.1 Organization and Authority. Buyer is a limited partnership
duly formed and validly existing under the laws of the State of Washington; has
full power and authority to execute, deliver and perform this Agreement; and has
taken all partnership action required by law and otherwise to authorize the
execution, delivery and performance of this Agreement. This Agreement
constitutes the legal, valid and binding obligation of Buyer enforceable in
accordance with its terms, except insofar as enforceability may be affected by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
now or hereafter in effect affecting creditors' rights generally or by
principles governing the availability of equitable remedies.
6.2 Litigation and Proceedings. Except as set forth in
Schedule 6.2, there is no litigation at law, or in equity, and there is
no other proceeding or investigation pending or, to Buyer's Knowledge,
threatened against, or which may adversely affect, Buyer, or which involves the
possibility of any judgment, order, award or other decision which might impair
the ability of Buyer to perform under this Agreement, and Buyer does not know of
any basis for such litigation or proceedings.
6.3 Finders and Brokers. Neither Buyer nor its officers or
employees has entered into any contract, arrangement, or understanding with any
person or firm, which may result in the obligation of Seller or Buyer to pay any
finder's, brokerage, or agent's fees, commission or other like payment or
compensation.
6.4 Citizenship. Buyer is not a "foreign person" as defined in
Section 1445(f)(3) of the Code. Seller shall have the right to furnish copies of
any Buyer affidavit of such representation to the Internal Revenue Service.
6.5 No Breach or Violation. To Buyer's actual knowledge, the
execution, delivery, and performance of this Agreement will not (a) conflict
with or result in a breach or violation by Buyer of, or (b) constitute default
by Buyer under, any statute, ordinance, rule, regulation, or order, or any
material agreement, lease, instrument, document or arrangement, except such
conflicts, breaches, violations or defaults as would not, individually or in the
aggregate, have a material adverse effect on the ability of Buyer to perform its
obligations under this Agreement.
6.6 No Consents. Except as provided in Schedule 5.6,
Buyer does not need to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement.
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SECTION 7. CONDUCT PENDING CLOSING
7.1 Access to Premises and Records. Between the date of execution and
delivery of this Agreement and the Closing Date, Seller shall allow Buyer, its
accountants, auditors, engineers and representatives full access, on not less
than three (3) Business Days' prior notice, at mutually agreed upon reasonable
times, to all of the premises and books and records of Seller and the CATV
Systems and shall furnish to Buyer and its representatives all information
regarding the business and properties of Seller as may be reasonably requested
by Buyer or its representatives. Buyer shall have the opportunity to perform CLI
testing, other FCC-related systems performance testing, and environmental site
assessments of the Assets pursuant to Section 10.1 with Seller's full
cooperation and assistance prior to the Closing, provided that such audit and
other procedures do not unreasonably interfere with the operations of the CATV
Systems. Buyer shall have the opportunity to inspect the financial records of
Seller relating to the CATV Systems and to perform a field audit of Seller's
accounts and such other procedures commonly performed in an audit conducted by
an independent certified public accounting firm with Seller's full cooperation
and assistance prior to the Closing, provided that such audit and other
procedures do not unreasonably interfere with the operations of the CATV
Systems. Seller also shall cooperate with Buyer and its accountants, auditors
and representatives to enable Buyer to generate the type of financial
information required under Form 8-K to be filed by Buyer with the United States
Securities and Exchange Commission pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder. Buyer (a) will treat and hold, and will cause its
employees and representatives to treat and hold, as confidential any information
concerning the business and affairs of Seller that is not already generally
available to the public received by Buyer, its employees, or its representatives
from Seller pursuant to this Section 7.1 or otherwise, (b) will not use any such
information except in connection with this Agreement, and (c) if this Agreement
is terminated for any reason whatsoever, will return to Seller all tangible
embodiments (and copies thereof) of such information in its possession.
7.2 Continuity and Maintenance of Operations. Seller shall continue to
operate the CATV Systems, shall maintain the Assets (including maintenance and
replenishment of all inventories of spare equipment and parts reasonably
adequate for the needs of the CATV Systems, including without limitation those
listed in Schedule 1.2), and shall keep all of its business books, records, and
files all in the ordinary course of business in accordance with past practices,
consistently applied. Seller shall bear the risk of loss on or prior to Closing
with respect to the Assets and the CATV Systems as a result of any loss, claim,
casualty, or calamity. Seller shall not, without prior written consent of Buyer,
which consent shall not be unreasonably withheld, (i) change the rate charged
for Basic Package Services or any premium services, (ii) add or delete any
program services, or (iii) rearrange the CATV Systems' channel line-ups. Seller
shall not sell, transfer, assign, or permit the creation of any Security
Interest on any of the Assets without the prior written consent of Buyer, which
consent shall not be unreasonably withheld. Except as otherwise required under
the terms of this Agreement, Seller may amend or cancel any CATV Instruments,
any Seller Contract or any other contract or agreement which is necessary or
appropriate for the maintenance of the Assets or the operation of the CATV
Systems, but only in the ordinary course of business. Seller specifically
acknowledges that any amendment or cancellation of any franchise or lease
agreement shall be deemed not to be in the ordinary course of business. Seller
shall not itself, nor shall Seller permit any of its directors, officers,
shareholders, agents or employees to pay any of Seller's accounts receivable
from the CATV Systems' subscribers outstanding on the date of this Agreement or
hereafter; provided, however, that such persons shall be permitted to make
payment for CATV services received by them at their own dwellings.
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7.3 Existing Relationships. Except as otherwise required by this
Agreement, Seller shall use its commercially reasonable efforts to preserve the
CATV Systems as a going concern and to preserve existing relationships with
suppliers, customers, governmental entities and others having business dealings
with Seller, all in accordance with Seller's ordinary course of business
consistent with past practices.
7.4 Employees; Employment Relationship. All of Seller's employees who
work primarily for the CATV Systems shall be and remain Seller's employees until
Closing, with Seller having full authority and control over their actions, and
Buyer shall not assume the status of an employer or a joint employer of, or
incur or be subject to any liability or obligation of an employer with respect
to, any such employees unless and until actually hired by Buyer. Seller shall be
solely responsible for any and all liabilities and obligations Seller may have
to its employees who work primarily for the CATV Systems, including without
limitation compensation, severance pay, and accrued vacation time and long-term
disability, if applicable. Seller shall comply with the provisions of the Worker
Adjustment and Retraining and Notification Act and similar laws, if applicable,
and shall be solely responsible for any and all liabilities, penalties, fines,
or other sanctions that may be assessed or otherwise due under such laws on
account of the closing of the transaction contemplated by this Agreement and the
dismissal or termination of any of Seller's employees who work primarily for the
CATV Systems by Seller at or prior to Closing. Seller shall use its commercially
reasonable efforts to preserve Seller's relationship with its employees who work
primarily for the CATV Systems and shall pay to those employees all salaries,
commissions, benefits and other compensation to which they are entitled for
services rendered prior to Closing. Seller shall not, without the prior written
consent of Buyer, which consent shall not be withheld unreasonably, change the
compensation of any employees of the CATV Systems where such changes would be
inconsistent with Seller's past practices consistently applied.
7.5 Buyer's Right to Employ. Seller consents to Buyer discussing with
any of Seller's employees who work primarily for the CATV Systems, at any time
after twenty (20) calendar days from the execution of this Agreement the
possibility of their employment by Buyer after the Closing and to Buyer hiring
any of those employees after the Closing. Seller agrees and acknowledges,
however, that Buyer is under no obligation to offer employment to any of those
employees. Current employees of Seller which are hired by Buyer, if any, shall
not be considered to be in the employ of Buyer until after the Closing Date and
until such time as they have been formally hired by Buyer and satisfy the active
work requirement of completing one full hour of active service for Buyer.
7.6 Approvals. To the extent reasonably possible, Seller shall deliver
to Buyer for Buyer's review and approval a copy of Seller's request for each
Required Consent, together with any franchise, agreement, lease, document,
instrument or paper to be executed by or on behalf of any governmental entity,
franchising authority, lessor or other third party, prior to delivery of such to
any such party. Such consents shall be in forms reasonably acceptable to Buyer.
Seller shall use its commercially reasonable efforts to obtain each of the
Required Consents. Buyer shall reasonably cooperate with and assist Seller in
obtaining the Required Consents.
7.7 News Releases and Media Notification. Prior to Closing, any and all
news releases or other notification of the local media with respect to the
transactions contemplated in this Agreement shall be subject to the prior
written consent of both Seller and Buyer, which consent shall not be
unreasonably withheld.
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7.8 Written, Executed Easements. With respect to easements listed in
Schedule 5.5.4 that are not in a properly recordable form, Seller shall use its
commercially reasonable efforts to obtain written easements that are assignable
to Buyer, executed by the proper third parties, that accurately set forth the
legal descriptions and scope of such easements or rights-of-way.
7.9 Buyer's Inspection; Adequacy of Seller's Remedial Steps. During the
ninety (90) day period following the date of this Agreement, but in no event
later than forty five (45) days prior to Closing, Buyer, at its expense and with
Seller's reasonable cooperation, shall have the opportunity to conduct tests and
inspections to determine whether the CATV Systems comply with the Technical
Standards. To the extent the CATV Systems or any portion thereof are not in
compliance with the Technical Standards, Buyer will promptly notify Seller of
such noncompliance and Seller, at its sole cost and expense, will take all
appropriate Remedial Steps during the thirty (30) day period following such
notification but in no event later than ten (10) days prior to Closing and shall
maintain the CATV Systems in compliance with the Technical Standards until
Closing. In the event Buyer and Seller are unable to agree whether Seller has
taken appropriate Remedial Steps to bring the CATV Systems into compliance with
the Technical Standards, Buyer and Seller shall appoint a mutually acceptable
engineering firm to conduct appropriate tests, in accordance with the rules of
the FCC and the standards generally accepted by qualified engineers in the CATV
industry, to certify the CATV Systems' compliance with the Technical Standards,
which firm shall render a written report to Buyer and Seller within thirty (30)
calendar days after it has been retained, and whose fees shall be paid one-half
by Buyer and one-half by Seller.
7.10 Retransmission Consent Agreements. Buyer will use its reasonable
best efforts in good faith to obtain, and Seller shall reasonably cooperate with
and assist Buyer in obtaining, all material retransmission consent agreements,
provided, however, that such efforts by Buyer and such cooperation and
assistance by Seller shall not require either party to undertake any
extraordinary or unreasonable measures to obtain such retransmission consents,
including, without limitation, the payment of extraordinary or unreasonable fees
or expenses, or the initiation or prosecution of legal proceedings.
7.11 Franchises. Buyer and Seller shall cooperate, using
commercially reasonable efforts, to obtain extensions of the term of or renewals
of the franchises from all of the franchising authorities of the CATV Systems,
such that no franchise shall have a stated expiration date prior to December 31,
2000. "Commercially reasonable efforts" as used in this Section 7.11
shall not require Seller to agree to franchise terms that are reasonably
unsatisfactory to Seller.
SECTION 8. CLOSING; CLOSING DATE; TERMINATION
8.1 Closing Date. Subject to the terms and conditions of this
Agreement, Closing shall be conducted at the offices of Buyer or such other
location on a Closing Date as may be mutually agreed to by the parties. Timing
of the Closing shall be subject to the following terms: Closing shall take place
not later than twenty (20) Business Days after Seller has obtained all Required
Consents and has complied with all other terms and conditions of this Agreement;
or on such later date as may be acceptable to Buyer and Seller.
8.2 Termination. This Agreement may be terminated at any time prior to
Closing:
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(a) by the mutual written consent of Seller and Buyer;
(b) by Buyer in its sole and absolute discretion, if Seller fails
to demonstrate to Buyer's reasonable satisfaction that at the Closing
Date the CATV Systems (i) serve no fewer than two thousand seven
hundred ninety (2,790) Equivalent Subscribers, or (ii) generate not
less than ninety percent (90%) of the Minimum Monthly Revenue;
(c) by either Seller or Buyer, in the event of a material breach or
misrepresentation under this Agreement by the other party unless (i)
such breach is cured within fifteen (15) calendar days after written
notice thereof is given by the party alleging such material breach or
misrepresentation, or (ii) the alleged breaching party has given
written notice providing reasonable assurance to the nonbreaching party
that it is exercising its diligent best efforts to cure the alleged
breach; provided that in no circumstance shall the period to cure
exceed forty-five (45) calendar days after the original written notice
was given;
(d) by either party in such party's sole and absolute discretion,
if the transactions contemplated by this Agreement shall not have been
consummated on or before March 15, 1996;
(e) by Buyer if Buyer gives written notice to Seller of termination
within ten (10) calendar days of giving written notice to Seller
pursuant to Section 10.1.
8.3 Effect of Termination. In the event this Agreement is terminated
pursuant to Section 8.2:
(a) this Agreement will thereafter be void and have no force and
effect, except that Sections 5.16, 14 and 15.7 and this Section 8.3
will remain in effect;
(b) nothing in this Section 8.3 shall be deemed to release either
party from any liability for any breach by such party of the terms and
provisions of this Agreement or any failure by such party to perform
its obligations hereunder. Nothing in this Section 8.3 or elsewhere in
this Agreement shall impair the right of either party, prior to
termination of this Agreement pursuant to Section 8.2, to pursue all
legal remedies for breach of contract and damages or to compel specific
performance by the other party of its obligations hereunder; and
(c) in the event this Agreement is terminated pursuant to Section
8.2(a), (d), or (e), neither Seller nor Buyer shall be liable to each
other for any legal or equitable remedies.
SECTION 9. SELLER'S OBLIGATIONS AT AND PRIOR TO CLOSING
Unless delivery is required prior to Closing by the terms of this
Agreement, Seller, at its sole cost and expense, shall deliver to Buyer at the
Closing all of the following:
9.1 Transaction Documents. Executed originals of a bill of sale, an
assignment and assumption agreement, an assignment and assumption of franchises,
an assignment and assumption of leases, the Seller's closing certificate, a
noncompetition agreement, an escrow agreement and a general counsel's opinion,
each substantially in the forms of Exhibits A, B, C, D, E, F, G and H,
respectively.
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9.2 Closing Documents Checklist. The documents, certificates and papers
listed on the Closing Documents Checklist, in the form of Exhibit I, together
with such other deeds, assignments, certificates, and other documents,
instruments, and agreements as shall be necessary or appropriate to vest in
Buyer all right, title, and interest in and to the Assets free and clear of all
Security Interests (except for Permitted Exceptions and liabilities assumed by
Buyer pursuant to Section 4.1) and all right, title, and interest of Seller
arising under or by virtue of each CATV Instrument and Seller Contract expressly
assumed in writing by Buyer, and as may otherwise be reasonably required by
Buyer.
9.3 Security Interest Searches. UCC searches, tax lien searches,
pending litigation searches and judgment searches of the county and state public
records from each county in which any of the Assets are located, within
forty-five (45) calendar days after the execution of this Agreement. Buyer, at
its sole expense, shall obtain any and all updates of such security interest
searches. To the extent that any Security Interests appear on the aforementioned
UCC searches, Seller shall deliver full and complete releases of such Security
Interests in form reasonably satisfactory to Buyer at Closing unless assumed by
Buyer.
9.4 Employees. Seller will pay its employees (except those employees
who are not hired by Buyer) all accrued, if any, compensation, including
vacation and other benefits accrued as of the Closing Date (except for amounts
owing under the terms of Seller's benefit plans, which amounts shall be provided
in accordance with the terms of such plans). Seller will terminate the
employment of each of its employees whose work relates solely to the CATV
Systems as of the Closing Date (except those employees who are not hired by
Buyer or relocated by Seller).
SECTION 10. BUYER'S OBLIGATIONS PRIOR TO, AT AND FOLLOWING CLOSING
10.1 Prior to Closing. Prior to Closing, Buyer will notify Seller of
its reasonable dissatisfaction, including therein the reasons for such
dissatisfaction, with the results and findings of Buyer's financial inspections
pursuant to Section 7.1 and "Level I" environmental audit with respect to the
Assets. Buyer shall deliver any such notice within ten (10) calendar days after
Buyer's receipt of the results of such inspections or audit, but in no event
more than sixty (60) calendar days after the execution of this Agreement.
10.2 At Closing. At Closing, Buyer shall: (a) deliver to Seller payment
of the portion of the Purchase Price required by Section 3.1.1; (b) deposit into
the escrow account the portion of the Purchase Price pursuant to the Escrow
Agreement (in the form of Exhibit F); and (c) deliver to Seller executed
originals of an assignment and assumption agreement, an assignment and
assumption of franchises, an assignment and assumption of leases, a
noncompetition agreement, an escrow agreement and the Buyer's closing
certificate, each substantially in the forms of Exhibits B, C, D, F, G and J,
respectively.
10.3 After Closing. After Closing, Buyer shall perform and pay any and
all obligations assumed by it pursuant to Section 4.1.
SECTION 11. CONDITIONS OF BUYER'S OBLIGATIONS
Buyer's obligations to close hereunder are subject to the satisfaction
of all of the following conditions, each of which must be satisfied on or before
the Closing Date and any of which may be waived in writing by Buyer.
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11.1 Approvals and Consents
11.1.1 Franchises. All franchising authorities shall have consented
to the assignment and assumption of the respective franchises and, if
applicable, shall have (i) waived in writing all rights, if any, they may have
to purchase all or any part of the CATV Systems, and (ii) extended the term of
or renewed such franchises so that no franchise shall have a stated expiration
date prior to December 31, 2000.
11.1.2 Other Required Consents. All Required Consents not required
to be obtained pursuant to Section 11.1.1 shall have been obtained and delivered
to Buyer. Buyer shall have received from Seller evidence reasonably satisfactory
to Buyer that no material terms or conditions of the CATV Instruments and Seller
Contracts have been or will be amended, modified or changed prior to or
effective with the Closing.
11.1.3 Retransmission Consent Agreements. Buyer, with Seller's
cooperation pursuant to Section 7.10, shall have obtained all material
retransmission consents in forms reasonably satisfactory to Buyer.
11.2 Performance by Seller of Covenants and Accuracy of Representations
and Warranties
11.2.1 Performance of Covenants. Seller shall have performed in all
material respects all of its agreements and covenants under this Agreement to
the extent such are required to be performed at or prior to Closing, and all of
Seller's representations and warranties shall be true and correct as of Closing.
11.2.2 Operability. Between the date of this Agreement and the
Closing Date, the CATV Systems shall not have suffered, on or prior to Closing,
any loss, claim, casualty, or calamity that has a material adverse effect on the
Assets or the CATV Systems, whether or not disclosed in Seller's amended
Schedules and whether or not covered by insurance. Seller shall bear the risk of
loss on or prior to Closing with respect to the Assets and the CATV Systems as a
result of any loss, claim, casualty, or calamity.
11.2.3 Restraint of Proceedings. No action, proceeding or
investigation shall have been instituted or threatened on or prior to Closing,
to set aside or modify the transactions provided for in this Agreement or to
enjoin or prevent its consummation or which would impair the ability of Buyer to
realize the benefits of such transactions.
11.2.4 No Governmental Action. No investigation, action or
proceeding shall have been commenced by the Department of Justice or Federal
Trade Commission or any other governmental entity challenging or seeking to
enjoin the consummation of this transaction and neither Buyer nor Seller shall
have been notified of a present intention by the Assistant Attorney General in
charge of the Antitrust Division of the Department of Justice, the Director of
the Bureau of Competition of the Federal Trade Commission or any governmental
entity (or their respective agents or designees) to commence, or recommend the
commencement of, such an investigation, action or proceeding.
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11.2.5 Equivalent Subscribers and Monthly Revenue. On the Closing
Date, the CATV Systems shall (i) serve no fewer than two thousand seven hundred
ninety (2,790) Equivalent Subscribers, and (ii) generate not less than ninety
percent (90%) of the Minimum Monthly Revenue.
11.2.6 Representation Letters. Seller's financial officer shall
have provided Buyer's accountants with a standard financial representation
letter certifying the fairness of the presentation of Seller's financial
position, the completeness of the information provided, and the absence of any
other irregularities, communications or transactions not otherwise disclosed. If
requested by Buyer's accountants in connection with the delivery of the standard
financial representation letter, Seller's general counsel shall have provided
Buyer's accountants with a no material loss contingencies representation letter.
11.2.7 Closing Documents. Buyer shall have received all of the
documents described in Section 9 in form reasonably satisfactory to Buyer.
11.3 Conveyance of Title to Assets
11.3.1 Security Interests. Buyer shall have received documentation
reasonably satisfactory to it of the release and discharge of any and all
Security Interests, on or against Seller (but only to the extent such Security
Interests relate to the Assets), the Assets or the CATV Systems, except to the
extent Buyer assumes such Security Interests pursuant to Section 4.1.
11.3.2 Title Insurance. Seller shall, at least forty-five (45) days
prior to the Closing Date, have delivered to Buyer the commitment(s) of a title
insurance company reasonably satisfactory to Buyer (the "Title Company")
agreeing to issue to Buyer ALTA lessee's extended coverage title insurance
policies and ALTA owner's extended coverage title insurance policies insuring
Buyer's interests in the Real Property (the values of such interests in the
properties so insured being mutually established by Buyer and Seller). In each
case, such policies shall be subject only to Permitted Exceptions. If a
preliminary title binder indicates an exception other than a Permitted
Exception, Seller shall, at its expense, have caused such exception to be
removed on or before the Closing Date; provided, however, that if Seller has not
caused such exception to be removed on or before the Closing Date, Buyer shall
still be obligated to close but shall be entitled to indemnification rights
pursuant to Section 14.2.3. At Closing Seller shall have delivered to Buyer an
affidavit or indemnification agreement that shall be sufficient to cause the
Title Company to affirmatively insure against the existence of outstanding
rights that could form the basis for mechanic's, materialmen's or similar liens,
claims of parties in possession and judgments. The payment of (a) all surveys
and other documents required by the Title Company to issue such policies, and
(b) all title insurance premiums shall be borne by Seller with respect to all
owned real property and shall be borne by Buyer with respect to all leased real
property.
SECTION 12. CONDITIONS OF SELLER'S OBLIGATIONS
Seller's obligations to close are subject to all of the following
conditions, any of which may be waived in writing by Seller.
12.1 Performance by Buyer. Buyer shall have performed in all material
respects all of its agreements and covenants under this Agreement to the extent
such are required to be performed at or prior to Closing.
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12.2 Buyer's Certificate. At Closing, Buyer shall have certified to
Seller that Buyer's representations and warranties set forth in this Agreement
are true and correct in all material respects as of Closing.
12.3 Operability. Between the date of this Agreement and the Closing
Date, the CATV Systems shall not have suffered, on or prior to Closing, any
loss, claim, casualty, or calamity that has a material adverse effect on the
Assets or the CATV Systems, whether or not disclosed in Seller's amended
Schedules and whether or not covered by insurance.
12.4 Restraint of Proceedings. No action, proceeding or investigation
shall have been instituted or threatened on or prior to Closing, to set aside or
modify the transactions provided for in this Agreement or to enjoin or prevent
its consummation.
12.5 No Governmental Action. No investigation, action or proceeding
shall have been commenced by the Department of Justice or Federal Trade
Commission or any other governmental entity challenging or seeking to enjoin the
consummation of this transaction and neither Buyer nor Seller shall have been
notified of a present intention by the Assistant Attorney General in charge of
the Antitrust Division of the Department of Justice, the Director of the Bureau
of Competition of the Federal Trade Commission or any governmental entity (or
their respective agents or designees) to commence, or recommend the commencement
of, such an action or proceeding.
12.6 Closing Documents. Seller shall have received all of the documents
described in Section 10 in form reasonably satisfactory to Seller.
SECTION 13. NONCOMPETITION AGREEMENT
Seller shall enter into a noncompetition agreement with Buyer, in the
form of Exhibit F.
SECTION 14. INDEMNIFICATION
14.1 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of each of Buyer and Seller made
pursuant to this Agreement shall survive the Closing for the following periods
after the Closing Date:
(a) The representations, warranties and covenants set forth in
Sections 5.4, 5.16, 6.3 and 10.3 shall survive without limitation as to time.
(b) All other representations, warranties and covenants shall
survive for eighteen (18) months after Closing.
Representations, warranties and covenants under this Agreement shall be of no
further force of effect after the applicable Termination Date (as defined at
Section 14.2.1(g)). Any claim for indemnification with respect to any
alleged breach of any representation, warranty or covenant not asserted by
notice given as herein provided that specifically identifies a particular breach
and the underlying facts thereto, which notice is given prior to the Termination
Date, may not be pursued and is irrevocably waived and
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released after such time. Any and all claims for indemnification under this
Section 14 must be based on either a Third Party Claim or a Direct Claim (as
such terms are defined below).
14.2 Limitations of Liability.
14.2.1 For purposes of this Section 14:
(a) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement;
(b) "Indemnifying Party" means any person or entity required to
provide indemnification under this Agreement;
(c) "Indemnifiable Losses" means any losses, liabilities, costs,
fines, penalties, damages (actual, punitive or other), and expenses and any
claims, demands or suits by any person or entity, including, without limitation,
any federal governmental authority or any state, county, town, municipality,
special political subdivision, or any agency, department or division related
thereto, and costs and expenses actually incurred in connection with any
actions, suits, demands, assessments, judgments and settlements and reasonable
attorneys' fees and expense, in such case (x) reduced by the amount of insurance
proceeds recovered from any person or entity as a result of the Indemnifiable
Losses involved and (y) provided that the underlying liability or obligation is
not the result of any action taken or omitted to be taken by the Indemnitee;
(d) "Indemnification Payment" means any amount of Indemnifiable
Losses required to be paid pursuant to this Agreement;
(e) "Third Party Claim" means any claim or commencement of any
action, proceeding, or investigation by any entity or person that is not a party
to this Agreement or an affiliate of such a party, and includes without
limitation claims asserted against Buyer (i) for any finder's, brokerage, or
agent's fees, commission or other like payments or compensation as a result of
Seller's activities, and (ii) arising directly or indirectly from any CATV
Instruments and Seller Contracts that are (x) included within the Excluded
Assets or (y) not assumed by Buyer pursuant to Section 4.1;
(f) "Direct Claim" means any claim by an Indemnitee on account of an
Indemnifiable Loss that does not result from a Third Party Claim; and
(g) "Termination Date" means the date of expiration of any
representation, warranty or covenant as set forth in Section 14.1.
14.2.2 As between Seller and any affiliate of Seller, on the one hand,
and Buyer and any affiliate of Buyer, on the other hand, the rights and
obligation set forth in this Section 14 will be the exclusive rights and
obligations with respect to the liabilities and obligations referred to in
Section 14.3 and any breach of the representations, warranties or covenants
contained in this Agreement, except for any liability, obligation or breach that
results from the actual fraud under the common law, not otherwise implied or
imputed, by a party to this Agreement.
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14.2.3 Notwithstanding any other provision of this Agreement or of any
applicable law, no Indemnitee will be entitled to make a claim against an
Indemnifying Party under Section 14.3.1 or Section 14.3.2 until the aggregate
amount of claims that may be asserted for such Indemnifiable Losses incurred by
the Indemnitee exceeds Forty Five Thousand Dollars ($45,000) after which amount
the Indemnitee may claim for the entire aggregate amount of such claims;
provided, that Buyer will be entitled to make a claim against Seller under
Section 14.3.1 for those Indemnifiable Losses incurred by Buyer relating to,
resulting from or arising out of a breach of Seller's covenant in Section 11.3.2
to cause exceptions, other than Permitted Exceptions, indicated on preliminary
title binders to be removed on or before the Closing Date if the aggregate
amount of claims that may be asserted for such Indemnifiable Losses exceeds
Twenty Thousand Dollars ($20,000), after which amount Buyer may claim for the
entire amount of such claims.
14.2.4 Notwithstanding any other provision of this Agreement, the
indemnification obligations of Seller under Section 14.3.1 and of Buyer under
Section 14.3.2 will not exceed the Purchase Price.
14.2.5 Notwithstanding anything to the contrary contained herein, no
Indemnifying Party shall be liable to or obligated to indemnify any Indemnitee
hereunder for any consequential, special, multiple, punitive or exemplary
damages including, but not limited to, damages arising from loss or interruption
of business, profits, business opportunities or goodwill, loss of use of
facilities, loss of capital, claims of customers, or any costs or expense
related thereto, except to the extent such damages have been recovered by a
third person and are the subject of a Third Party Claim for which
indemnification is available under the express terms of this Section 14.
14.3 Indemnification.
14.3.1 Subject to the other sections of this Section 14, Seller will
indemnify, defend and hold harmless Buyer and its affiliates, and their
respective directors, officers, agents and representatives from all
Indemnifiable Losses relating to, resulting from or arising out of (a) a breach
by Seller of any of the representations, warranties or covenants contained in
this Agreement, except for any such breach of representations, warranties or
covenants which was specified on Seller's Schedules or closing certificate all
of which are waived upon Closing, or (b) any Third Party Claim, whether filed,
asserted, or sought before or after the Closing Date, in respect of the
operations of the CATV Systems or the ownership or operation of the Assets or
CATV Systems by Seller, on or prior to the Closing Date, regardless of whether
known or unknown, asserted or unasserted, on the Closing Date.
14.3.2 Subject to the other sections of this Section 14, Buyer will
indemnify, defend and hold harmless Seller and its affiliates, and their
directors, officers, agents and representatives from all Indemnifiable Losses
relating to, resulting from or arising out of (a) a breach by Buyer of any
representations, warranties or covenants contained in this Agreement, except for
any such breach of representations, warranties or covenants which was specified
on Buyer's closing certificate all of which are waived upon Closing, or (b) any
Third Party Claim, filed, asserted, or sought after the Closing Date, in respect
to the ownership or operation of the assets or the CATV Systems by Buyer or its
affiliates after the Closing Date.
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14.3.3 Payments made under this Section 14.3 shall be treated by Buyer
and Seller as purchase price adjustments and Buyer and Seller shall file all tax
returns consistent with such treatment. Notwithstanding anything to the contrary
contained herein, Buyer shall not be indemnified or reimbursed for any
adjustment to the basis of any asset resulting from any adjustment to the
purchase price or any additional or reduced taxes resulting from any such basis
adjustment.
14.4 Defense of Claims.
14.4.1 If any Indemnitee receives notice of the assertion of any Third
Party Claim against such Indemnitee, with respect to which an Indemnifying Party
is obligated to provide indemnification under this Agreement, the Indemnitee
will give such Indemnifying Party reasonably prompt written notice thereof, but
in any event not later than thirty (30) calendar days after receipt of actual
notice of such Third Party Claim; provided, however, that the failure of the
Indemnitee to notify the Indemnifying Party during the required notification
period shall only relieve the Indemnifying Party from its obligation to
indemnify the Indemnitee pursuant to this Section 14 to the extent that
Indemnifying Party is materially prejudiced by such failure (whether as a result
of the forfeiture of substantive rights or defenses or otherwise); and provided,
however, that the Indemnitee must, in any event, notify the Indemnifying Party
prior to the Termination Date as required pursuant to Section 14.1 in order for
such party to be indemnified. The Indemnifying Party shall be entitled, upon
written notice to the Indemnitee, to assume the investigation and defense
thereof with counsel reasonably satisfactory to the Indemnitee. Whether or not
the Indemnifying Party elects to assume the investigation and defense of any
Third Party Claim, the Indemnitee shall have the right to employ separate
counsel and to participate in the investigation and defense thereof, provided,
however, that the Indemnitee shall pay the fees and disbursements of such
separate counsel unless (a) the employment of such separate counsel has been
specifically authorized in writing by the Indemnifying Party, (b) the
Indemnifying Party has failed to assume the defense of such Third Party Claim
within a reasonable time after receipt of notice thereof with counsel reasonably
satisfactory to such Indemnitee, or (c) the named parties to the proceeding in
which such claim, demand, action or cause of action has been asserted include
both the Indemnifying Party and the Indemnitee and, in the reasonable judgment
of counsel to such Indemnitee, there exists one or more defenses that may be
available to the Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party shall
not be liable for the fees and disbursements of more than one counsel for all
Indemnified Parties in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or circumstances.
Without the prior written consent of the Indemnitee, the Indemnifying Party will
not enter into any settlement of any Third Party Claim that would lead to
liability or create any financial or other obligation on the part of the
Indemnitee unless such settlement includes as an unconditional term thereof the
release of the Indemnitee from all liability in respect of such Third Party
Claim.
14.4.2 Any Direct Claim will be asserted by giving the Indemnifying
Party reasonably prompt written notice thereof, but in any event not later than
thirty (30) calendar days after the Indemnitee actually becomes aware of the
incurrence thereof, and the Indemnifying Party will have a period of thirty (30)
calendar days within which to respond in writing to such Direct Claim; provided,
however, that the failure of the Indemnitee to notify the Indemnifying Party
shall only relieve the Indemnifying Party from its obligation to indemnify the
Indemnitee pursuant to this Section 14 to the extent the Indemnifying Party is
materially prejudiced by such failure (whether as a result of the forfeiture of
substantive rights or defenses or otherwise); and provided, however, that the
Indemnitee must, in any event, notify the Indemnifying Party prior to the
Termination Date as required pursuant to
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Section 14.1 in order for such party to be indemnified. If the Indemnifying
Party does not so respond within such thirty (30) calendar day period, the
Indemnifying Party will be deemed to have rejected such claim, in which event
the Indemnitee will be free to pursue such remedies as may be available to the
Indemnitee on the terms and subject to the provisions of this Section 14.
14.4.3 If after the making of any Indemnification Payment, the amount
of the Indemnifiable Loss to which such payment relates is reduced by recovery,
settlement or otherwise under any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other entity, the amount of
such reduction (less any costs, expenses, premiums or taxes incurred in
connection herewith) will promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any Indemnification Payment, the Indemnifying
Party will, to the extent of such Indemnification Payment, be subrogated to all
rights of the Indemnitee against any third party that is not an affiliate of the
Indemnitee in respect to the Indemnifiable Loss to which the Indemnification
Payment relates; provided that (a) the Indemnifying Party shall then be in
compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss and (b) until the Indemnitee recovers full payment of its
Indemnifiable Loss, all claims of the Indemnifying Party against such third
party on account of said Indemnification Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision of this
Section 14, each such Indemnitee and Indemnifying Party will duly execute upon
request all instruments reasonably necessary to evidence and perfect the
above-described subrogation and subordination rights.
14.5 Dispute Resolution Regarding Indemnification Claims. If either
Seller or Buyer rejects a claim for indemnification by the other party, Seller
and Buyer shall submit the dispute to binding arbitration in accordance with the
alternative dispute resolution procedures set forth in Exhibit K.
SECTION 15. MISCELLANEOUS
15.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
15.2 Assignment and Delegation of Agreement. Neither party may assign
this Agreement or any interest in this Agreement without the prior written
consent of the other party, which consent shall not be unreasonably withheld;
provided, however, that Buyer may assign and delegate, within thirty (30)
calendar days after the execution of this Agreement, all or a part of its rights
and obligations under this Agreement to one or more entities affiliated with
Buyer without the prior written consent of Seller but with five (5) calendar
days' prior written notice to Seller, and thereafter with the prior written
consent of Seller.
15.3 Entire Agreement; Amendments. This Agreement constitutes and
embodies the entire agreement and understanding between the parties with respect
to the subject matter hereof and this Agreement supersedes all prior or
contemporaneous written or oral agreements and understandings between the
parties with respect thereto. This Agreement may not be modified or amended
except by a written instrument executed by the parties.
15.4 Binding Effect. Notwithstanding the provisions of Section 15.2,
this Agreement shall be binding upon and shall inure to the benefit of the
parties to this Agreement and their respective permitted successors and assigns.
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15.5 Additional Agreements. Seller and Buyer shall sign any additional
agreements and other documents necessary or desirable to carry out the terms of
this Agreement.
15.6 Efforts. Subject to the terms and conditions herein, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using all
reasonable efforts to obtain all necessary waivers, consents and approvals to be
provided by each of them hereunder, and to effect all necessary registrations
and filings, including, but not limited to, submissions of information requested
by governmental authorities.
15.7 Expenses. Except as otherwise expressly provided in this
Agreement, each party shall pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations hereunder, and the consummation of the
transactions contemplated by this Agreement.
15.8 Execution in Multiple Counterparts. This Agreement may be executed
in one or more identical counterparts, and all of such counterparts, when taken
together, shall be deemed to constitute the original of this Agreement.
15.9 Schedules and Exhibits. Each of the Schedules and Exhibits listed
below shall be incorporated into and shall for all purposes be deemed a part of
this Agreement:
Schedule 1.2 - Assets
Schedule 1.8 - Description of CATV Systems
Schedule 1.15 - Excluded Assets
Schedule 3.4 - Allocation of Purchase Price
Schedule 4.1 - Seller's Obligations Assumed by Buyer
Schedule 5.4 - Security Interests
Schedule 5.5.4 - Easements Not Held by Seller
Schedule 5.5.5 - Environmental Matters
Schedule 5.6 - Required Consents
Schedule 5.8.1 - LFA Certifications and Rate Complaints
Schedule 5.8.5 - Broadcast Signals Carried
Schedule 5.9.1 - Copyright Filing Matters
Schedule 5.11 - Litigation and Proceedings
Schedule 5.13.1 - Employees
Schedule 5.13.9 - Form 395-A Filings
Schedule 5.14 - Rate Reduction Orders
Schedule 5.19 - Seller's Financial Statements
Schedule 5.20 - Free CATV Service
Schedule 6.2 - Litigation Matters
Exhibit A - Bill of Sale
Exhibit B - Assignment and Assumption Agreement
Exhibit C - Assignment and Assumption of Franchise
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Exhibit D - Assignment and Assumption of Lease
Exhibit E - Seller's Closing Certificate
Exhibit F - Noncompetition Agreement
Exhibit G - Escrow Agreement
Exhibit H - Seller's General Counsel's Opinion
Exhibit I - Closing Documents Checklist
Exhibit J - - Buyer's Closing Certificate
Exhibit K - Alternative Dispute Resolution Procedures
Any of such Schedules and Exhibits may be later amended or revised by
the mutual consent of the parties. Such Schedules and Exhibits, as so amended or
revised, shall be true, complete and correct in all material respects and shall
be incorporated into and shall for all purposes be deemed a part of this
Agreement.
15.10 Waiver. No waiver of or with respect to any term, provision,
requirement, or condition of this Agreement, nor consent by a party to the
breach of or departure from any of the terms, provisions, requirements or
conditions hereof by the other party, shall in any event be binding on or
effective against the waiving or non-breaching party unless it be in writing and
signed by such party, and then such waiver shall be effective only in the
specific instance and for the purpose for which given.
15.11 Counsel. Each party has been represented by its own counsel in
connection with the negotiation and preparation of this Agreement and,
consequently, each party hereby waives the application of any rule of law that
would otherwise be applicable in connection with the interpretation of this
Agreement, including but not limited to any rule of law to the effect that any
provisions of this Agreement shall be interpreted or construed against the party
whose counsel drafted the provision.
15.12 Captions and Headings. The captions and headings are inserted in
this Agreement for convenience only, and shall in no event be deemed to define,
limit, or describe the scope or intent of this Agreement, or of any provision
hereof, nor in any way affect the interpretation of this Agreement.
15.13 Notices. All notices and communications required or permitted to
be given under any of the provisions of this Agreement shall be in writing and
shall be deemed to have been duly given when delivered by messenger, by
overnight delivery service, by facsimile transmission (receipt confirmed), or
mailed by first class certified mail, return receipt requested, addressed to the
parties at the addresses set forth below or at such other addresses as either
party shall notify the other in accordance with this Section 15.13:
If to Buyer:
Northland Cable Properties Eight Limited Partnership
1201 Third Avenue, Suite 3600
Seattle, Washington 98101
Attn: John S. Whetzell and James A. Penney
Facsimile: (206) 623-9015
and to:
Asset Purchase Agreement Page 33
<PAGE> 40
John E. Iverson, Esq.
Ryan Swanson & Cleveland
1201 Third Avenue, Suite 3400
Seattle, Washington 98101
Facsimile: (206) 583-0359
If to Seller:
TCI Cablevision of Georgia, Inc.
c/o Tele-Communications, Inc.
Terrace Tower
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attention: Gary S. Howard and Ramona L. Whitman
Facsimile: (303) 488-3209
and to:
TCI Cablevision of Georgia, Inc.
c/o Tele-Communications, Inc.
Terrace Tower
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attention: Legal Department
Facsimile: (303) 488-3217
15.14 Legal Expenses. If any proceeding is brought by either party to
enforce or interpret any term or provision of this Agreement, the substantially
prevailing party in such proceeding shall be entitled to recover, in addition to
all other relief as set forth in this Agreement, such party's reasonable
attorneys' and experts' fees and expenses.
15.15 Severability; Invalidity. If any provision of this Agreement is
held to be invalid, such invalidity shall not render invalid the remainder of
this Agreement or the remainder of which such invalid provision is a part. If
any provision of this Agreement is so broad as to be held unenforceable, such
provision shall be interpreted to be only so broad as is enforceable.
15.16 Time of the Essence. Time is of the essence in this Agreement.
BUYER: NORTHLAND CABLE PROPERTIES EIGHT
LIMITED PARTNERSHIP
By Northland Communications Corporation,
Managing General Partner
By /s/ James A. Penney
-------------------------------
James A. Penney, Vice President
Asset Purchase Agreement Page 34
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SELLER: TCI CABLEVISION OF GEORGIA, INC.
By /s/ Gary S. Howard
-------------------------------
Its Vice President
-------------------------------
Asset Purchase Agreement Page 35
